EUROPE NEWS: Big bang theory

PIMCO is among a wave of US firms with deep pockets beefing up in Europe in order to buy into distressed real estate and private equity-style deals. PERE Magazine October 2012 issue.

Pacific Investment Management Company (PIMCO), the fixed-income behemoth with $1.82 trillion in assets under management, is among a number of US firms beefing up in Europe to capitalise on dislocation in the region’s real estate markets. The Newport Beach, California-based firm, which is home to the world’s biggest bond fund, is looking to add a senior real estate investment professional in its London office to join or lead its nascent team and has hired headhunters, according to sources.

In fact, PIMCO has been quietly building its presence in Europe for a while. James Gilbert, a vice president at New York’s AREA Property Partners who worked on European deals, joined PIMCO’s London office earlier this year. His appointment added to that of senior vice president Lee Galloway, who joined in 2010. Prior to joining PIMCO, Galloway was head of credit and research in Europe at private investment firm Cambridge Place and had set up Société Générale’s European real estate lending business, White Tower.

So far, PIMCO has struck two deals in Germany, where the firm also has an office. In March, it bought the €1.4 billion Diversity Funding CMBS related to Lehman Brothers’ securitisation of the UK’s Northern Rock commercial real estate loan portfolio. Then, in August, PIMCO bought a €238 million Lehman Brothers real estate debt portfolio from Germany’s Bundesbank. The firm typically invests in distressed real estate opportunities through its alternatives platform.

Other North American firms with deep pockets that are building up a presence in Europe include Fortress Investment Group, which hired Deutsche Bank’s head of European commercial real estate, Cyril Courbage, earlier this year; Starwood Capital Group, which hired Peter Denton from Germany’s Westdeutsche ImmobilienBank; and Brookfield Asset Management, which recently hired David Brush.