The past year may have seen fundraising slow to a trickle for most private equity real estate firms, however industry heavyweights are still pulling their weight when it comes to raising value-added and opportunistic capital, according to the 2009 PERE 30.
For the second year running, PERE magazine has produced its ranking of the 30 largest private equity real estate firms in the world. Tracking direct-investment capital raised for blind pool, dedicated private equity real estate funds since January 2004, the 2009 PERE 30 reveals that the top 30 firms raised a total of $211.9 billion over the past five years. That compares with $190 billion raised between 2003 and 2008, as calculated by last year’s list.
The line-up of the top 30 firms though has not remained static. Of the 24 firms that reappeared in the top 30 list from last year, 12 fell one or more positions compared with 2008 and four remained static – including the firms in first and second position.
Some firms managed to close sizeable fundraisings, which boosted their respective ranks significantly, or allowed them to debut on the top 30 list. A total of eight firms increased their standing in the ranking, while six new firms entered the field for the first time, including Angelo Gordon, AXA Real Estate Investment Management, DRA Advisors, Hines, Prudential Real Estate Investors and Westbrook Capital Partners.
Among the firms to significantly raise their standing in the list by three or more positions were: Beacon Capital Partners, CBRE Investors, KK daVinci, LaSalle Investment Management, Lubert-Adler Real Estate and Walton Street Capital.
As in prior years, the PERE 30 is based on the amount of private equity real estate direct investment capital raised over a five-year period.
All fundraising totals are calculated in US dollars. Where funds were raised in non US-dollar currencies, we have taken the amount of capital raised in its original currency and converted it on 21 April using the following rates: $1 = €0.77; £0.68; ¥98.66; C$1.24.
And now without further ado, we present the PERE 30 …
THE PERE 30
2009 RANK NAME OF FIRM HEADQUARTERS CAPITAL RAISED ($BN) 2008 RANK
1 The Blackstone Group New York $25.60 1
2 Morgan Stanley Real Estate Investing New York $20.15 2
3 Goldman Sachs Real Estate Principal Investment Area New York $13.58 4
4 Colony Capital Los Angeles $11.56 5
5 Beacon Capital Partners Boston $9.75 9
6 Lehman Brothers Real Estate Partners New York $9.35 6
7 LaSalle Investment Management Chicago $9.05 10
8 Tishman Speyer New York $8.70 3
9 The Carlyle Group Washington DC $8.21 7
1 0 Westbrook Capital Partners New York $6.74 —
11 MGPA London $6.31 11
12 CBRE Investors Los Angeles $6.12 15
13 AREA Property Partners New York $6.08 14
14 Rockpoint Group New York $5.56 13
15 Prudential Real Estate Investors Parsippany (New Jersey) $5.39 —
16 Lubert-Adler Real Estate Philadelphia $5.24 26
17 KK daVinci Tokyo $5.20 25
18 RREEF Alternative Investments New York $4.71 16
19 Walton Street Capital Chicago $4.70 22
20 Hines Houston $4.25 —
21 Citi Property Investors New York $4.10 20
22 Grove International Partners London $4.03 17
23 The JBG Companies Chevy Chase (Maryland) $3.98 19
24 Shorenstein Properties San Francisco $3.94 18
25 Angelo, Gordon & Co. New York $3.78 —
26 JER Partners McLean (Virginia) $3.38 21
27 AXA REIM Paris $3.24 —
28 Heitman Chicago $3.21 23
29 DRA Advisors New York $3.00 —
30 Starwood Capital Greenwich (Connecticut) $2.95 27
Profiles of the top 15 capital raisers:
1. The Blackstone Group
Headquarters New York
Number of real estate professionals 84
Assets under management $22.9 billion as of 31 Dec 2008
Blackstone has raised nearly $26 billion over the past five years – almost $6 billion more than its closest rival, Morgan Stanley Real Estate. In a sign of things to come, chief executive Stephen Schwarzman revealed during an investor call in February that the firm had $12 billion of dry powder in its real estate funds, ready to invest when the time is right. When Blackstone does finally open the vault, we can expect some large take-privates as the real estate sector begins its consolidation. According to Schwarzman, the firm has “the largest amount of available capital in the industry”, but is “patiently remaining on the sidelines” for real estate opportunities to become more attractive in late 2010 or even later as sellers are forced to come to market. “We basically think real estate still has further to fall [as compared to private equity] before we get really active,” added chief operating officer, Tony “Hamilton” James. In the interests of transparency and fairness, we should point out that the $25.60 billion figure in the PERE 30 ranking includes €3.1 billion raised for Blackstone Real Estate Partners Europe III. The vehicle is not expected to hold a final close until June, according to people familiar with the matter, however a recent Securities and Exchange Commission filing revealed the firm had collected more than €3 billion of commitments from investors. Blackstone, of course, has its problems like all the other large firms. The European fund was supposed to have closed in June last year, while previous acquisitions, such as the 2007, $20.1 billion Hilton Hotel deal, are facing potentially significant writedowns, according to reports. Corporately, Blackstone has been less affected than other large US investment banks, with less problematic investments, less high profile departures and no TARP money. However, it is still struggling from a declining share value, after going public in 2007, and according to recent reports, its latest private equity offering, Blackstone Fund VI, will be markedly smaller than originally envisaged. Despite that there is a growing sense that once Blackstone lights up both its real estate and LBO rockets, the show is going to be spectacular.
2. Morgan Stanley Real Estate Investing
Headquarters New York
Number of real estate professionals 450 +
Assets under management $99.6 billion
Morgan Stanley Real Estate Investing has proved it is still able to raise serious capital despite having “issues” at the firm. Its latest vehicle, Morgan Stanley Real Estate Fund VII Global, has raised $6 billion for investment around the world and could end up as the largest real estate opportunity fund this year. Among its biggest investors is the China Investment Corporation, the $200 billion Chinese sovereign wealth fund that has committed $800 million to the vehicle, according to a report by Reuters. Raising the fund has not been a piece of cake, however. Not only did Morgan Stanley face the big freeze as investors decided to do nothing with their capital in 2008, but the bank also had several high profile changes at the top of the organisation. Within three months, the firm saw both of its
global co-heads step down from their full time roles. John Carrafiell volunteered to become a senior advisor to the MSREF funds, while Sonny Kalsi was placed on “administrative leave” in February. It
also emerged that the head of Morgan Stanley’s Chinese business, Garth Peterson, had been dismissed on suspicion of breaking the US Foreign Corrupt Practices Act. The firm also attracted some angst
for wanting to draw down LP commitments in previous funds to help pay down debt. These issues have
not helped the firm attain its original $10 billion target for the latest
property fund, MSREF VII Global. Californian pension fund, Contra Costa County Employees’ Retirement
Association, this year said it planned to withhold a proposed commitment to the fund following
a similar move by the New Jersey Division of Investment. More recently, Morgan Stanley has brought back some old hands to steady the ship, including Jay Mantz, who ran property investing from 2000 to
2005, and Morgan Stanley’s head of Asia, Owen Thomas. After also pulling out of separate accounts and making public significant write downs in its real estate investments, the bank will be hoping to draw a line under events. There have already been reports of Morgan Stanley investing in Brazil-based property companies. There will surely be many more to report on around the world.
3. Goldman Sachs Real Estate Principal Investment Area
Headquarters New York
Number of real estate partners 130
Total number of firm employees 30,000
Capital raised since inception $26.09 billion
For REPIA, 2008 will be remembered as the year it faced the most scrutiny since its inception in 1991. The firm, led by the triumvirate of Brahm Cramer, Edward Siskind and Todd Williams who collectively assumed the helm from retired global head Stuart Rothenberg in December, managed to close on
$2.39 billion for its Whitehall International 2008 fund. But the close coincided with widespread depreciation among the assets purchased by the previous funds in its Whitehall series. To compound things, the firm also faced criticism over its fee structure which was regarded by many in the market as complex and lucrative. Despite that, the Broad Street, New York-based investment firm, which has more than 130 real estate staff across offices in North America, Europe and Asia, still found plenty of things to buy. Notable purchases by REPIA in 2007 were on its home turf, such as the $1.3 billion acquisition
of four casinos, including the Stratosphere Casino Hotel in Las Vegas – which boasts the highest theme park in the world at 1,149 feet above ground level. In 2008, though, Europe took centre stage with REPIA’s standout purchase being made in Germany. In June, Goldman spent €3.4 billion on buying the
93,000 properties of the North Rhine-Westphalia state-owned company, Landesentwicklungsgesellschaft (LEG). Within two months, the firm had ventured east and purchased $300 million of luxury townhouses in Moscow from AIG European Real Estate Partners. That deal
was completed on behalf of both its Whitehall Street Real Estate Funds and its Goldman Sachs Developing Markets Real Estate Fund, the latter of which closed on $2.1 billion in 2007. REPIA has raised more than $26 billion of equity since the firm closed its first fund on $146 million in 1990. However, given the decline in popularity of momentum-driven real estate fund managers and more general problems facing Goldman Sachs, the Whitehall Street series appears to be slowing its acquisition pace. At least for now.
4. Colony Capital
Headquarters Los Angeles, CA
Number of private equity real estate professionals 18
Total number of firm employees 243
Capital raised since inception $15.6 billion
Colony Capital’s troubled portfolio of gaming investments has dominated headlines for the firm this year. Nonetheless, Colony is ploughing ahead in the fundraising department with reports the firm is in the market targeting $1 billion for its value-added vehicle Colony Realty Partners III, with plans to come to market with Colony Asia Investors II targeting $500 million. During 2008, the firm also gathered $900 million for a distressed real estate fund aiming to take advantage of market dislocation. The debt fund is in line with Colony’s ongoing diversification drive led by president Richard Saltzman. In addition to the debt space, Saltzman, hired by Colony founder Tom Barrack in 2003, has guided the firm beyond opportunistic investing establishing a core-plus, value-added platform, Colony Realty Partners, and two years ago, the real estate securities arm, Colony Investment Management. Colony’s growth is the silver lining on a very difficult year resulting from the firm’s sizeable eight-investment roster of gaming investments. Luckily, Colony is no stranger to distress having previously turned around properties including the mixed-use Fukoka complex in Japan and the Costa Smeralda resort in Sardinia. That experience revitalising distressed properties will now need to be put to good use. The firm’s troubles are
dominated particularly by the casino operator Station Casinos, which at press time was considering Chapter 11 bankruptcy protection. Station was bought in 2007 for $5.4 billion by Colony, Eurazeo and the company’s founding family, Fertitta, with Colony taking a controlling 75.9 percent stake. However, Barrack understands the real estate industry only too well. He recently told a Colony Capital investor conference: “[The industry is] going to make it, we are going to bite, scratch, kick together and we’ll just keep going through hell but it’s going to be hell for all of us for a while.”
5. Beacon Capital Partners
Number of senior real estate managers 17
Number of real estate professionals 68
Deal history 83 deals valued at $28.6 billion*
* Taken from PSERS fund documents dated 13 August 2008
Like Charles Dickens’ novel, the real estate markets of the past few years have been, figuratively, a tale of two cities. For those that bought properties during the boom time, the best of times have ultimately turned into the worst of times as they’ve watched their equity disappear under the pressure of rapidly declining values. For those that sold, it was quite possibly the best of times. Beacon Capital Partners, founded by Alan Leventhal, can certainly be pleased with the timing of its $3.3 billion disposition of a 10-building portfolio to Broadway Partners in 2006. That deal was one of several to ultimately pull down its sponsor Broadway following the collapse of the credit markets last year. Beacon will also no doubt be pleased with being one of just four firms to significantly increase their ranking in the 2009 PERE 30. Currently raising a $6 billion fund, according to US state pension documents, Beacon is maintaining its focus on office properties in developed markets in the US and western Europe. Of course, like Dickens’ classic, Beacon will also be focusing on some of its existing acquisitions. Although Beacon didn’t buy or
sell anything in 2008, in 2007 the Boston-based firm was an active trader. According to data provider Real Capital Analytics, Beacon disposed of roughly $7.5 billion of properties, including 25 office buildings to Broadway, and acquired more than $12 billion of offices. Included in those purchases was a 39-office portfolio bought from Blackstone for $6.35 billion. Those offices had originally been part of Equity Office Properties. But like all tales, there are two sides. Beacon also managed to flip 14 of those offices to Goldman Sachs’ Archon Group for $1.2 billion.
6. Lehman Brothers Real Estate Partners
Headquarters New York
Number of real estate professionals 53* (as of 15 September 2008)
Total number of firm employees 95* (as of 15 September 2008)
Capital raised since founding $14.34 billion
Last year, when PERE editors wrote the profile for Lehman Brothers Real Estate Partner’s entry into the top 30 ranking, we said that 2008 would be “another year of headlines”. How that prediction proved true. Few could have guessed that in just over a year, we would be describing the New York-based bank as the highest-profile casualty of the global economic crisis. On 15 September, just four months after we debuted the first ever PERE 30, news broke that Lehman Brothers had filed for Chapter 11 bankruptcy protection. The bank failed to find a buyer after poor performances across many of its divisions had left the bank posting third quarter losses of $3.9 billion. The bankruptcy though has left several question marks remaining, not least surrounding the future of its investment management division, which controls the private equity real estate platform. In August 2008, Lehman Brothers Real Estate Partners, led by Brett Bossung and Mark Newman, held a final close of its Lehman Brothers Real Estate Partners III (LBREP III) fund on $3.2 billion. Widely regarded as one of the more successful and long standing investment groups within the Lehman parent business, Lehman Brothers Real Estate Partners could be the subject of a management takeover. The deal would see Bossung, Newman and the firm’s European head Gerald Parkes take control of Lehman’s $780 million stake in the nine-year LBREP III fund. However, it will be a fight to the finish for the managers. PERE has been told that the platform has received more than 100 expressions of interest for its fund positions. A decision on the future of Lehman Brothers Real Estate Partners is expected in the coming weeks.
7. LaSalle Investment Management
Number of real estate professionals 642
Total number of firm employees 748
Assets under management $41 billion
The big fundraising story in 2008 for LaSalle Investment Management was in Asia, where the firm, with more than 200 staff across six offices, planted a tombstone on $3 billion of equity for its latest fund. Having outperformed its 18 percent to 20 percent target return for previous vehicles, LaSalle managed to lure numerous repeat investors and some new names for the La- Salle Asia Opportunity Fund III. Yet despite closing on Asia’s second biggest real estate fund, the firm has only committed 20 percent of its equity to date. In the US in 2008, LaSalle closed its LaSalle Income and Growth Fund V on $728 million, a valueadded fund targeting commercial and residential property. But, as in Asia, investment activity has been slow. The last sizeable purchase by the Income and Growth series of funds was in February 2008 when the firm spent $115 million acquiring a five-building business park in Silicon Valley’s Golden Triangle from Westbrook Partners and Four Corners Properties. With deals thin on the ground, LaSalle, led globally by chief executive officer Jeff Jacobson, used 2008 to reposition and grow parts of its platform. Making a number of senior appointments in Asia, LaSalle also formed a special situations team targeting corporate investments, in London, and opened a new office in Italy.
8. Tishman Speyer
Headquarters New York
Number of real estate professionals 900
Capital raised since inception $18.6 billion
Tishman Speyer, the New York firm perhaps best known for owning The Rockefeller Center and the Chrysler building, had a busy time in 2008. The largest fund it raised was Tishman Speyer Real Estate Venture VII, a North American value-added vehicle that garnered $1.5 billion in commitments at the start of the year. The fund was followed by Tishman Speyer European Real Estate Venture, as well as an $880 million China fund and a Brazil-focused vehicle. However, despite that effort, Tishman, founded by Jerry and Rob Speyer, has slipped down the PERE 30 rankings from third in 2008 to eighth this year. Goldman Sachs, Beacon Capital, Lehman Bothers Real Estate Partners, LaSalle Investment Management and Colony Capital all leap-frogged the firm. Glancing back over the past year, it is easy to see that some things have not gone Tishman Speyer’s way. Last year, we noted how the firm had won a hotly contested public competition to develop a huge project at the Hudson Yards rail depot in Manhattan. We also noted that Tishman had acquired the New York residential complex, Stuyvesant Town and Peter Cooper Village, in conjunction with BlackRock for $5.4 billion. But the prologue is not palatable. The Hudson Yards’ project was transferred to Goldman Sachs after Tishman withdrew from the scheme in May 2008 and its investment in Stuyvesant Town and Peter Cooper Village complex has run into trouble. In March this year, a New York court ruled the firm had improperly deregulated more than 3,000 apartments and raised rents beyond prescribed levels. Tishman can at least appeal the decision.
9. The Carlyle Group
Headquarters Washington DC
Number of real estate managing directors 17
Number of real estate professionals 140
Capital raised since inception $105.8 billion
Current number of portfolio assets 250
Not one to be sidelined by market conditions, The Carlyle Group has continued to gather capital over the last 12 months. The firm has hit the road targeting an ambitious $1 billion for its second Asia-focused real estate vehicle after closing its predecessor vehicle on $410 million in 2005. Carlyle
is eyeing both value-added and development opportunities in the region. Not overlooking opportunities
at home in the US, where the team is led by managing director Robert Stuckey, in September Carlyle established a $300 million joint venture with New York-based GFI Capital Resources to target US distressed residential properties. On the deal front, Carlyle and Crown Acquisitions were behind one of New York’s largest retail deals of 2008, which was also voted North American deal of the year in PERE’s global awards this year. The firms paid $525 million for a controlling interest in the 90,000-square-foot retail segment of the office tower located on Fifth Avenue from Kushner Companies. The retail portion of the building counts Abercrombie & Fitch’s 20,000-square-foot flagship store, the NBA Store and Hickey Freeman among the tenants.
10. Westbrook Partners
Headquarters New York
Number of real estate managing principals 10
Total number of firm employees 100
Capital raised since inception $10 billion+
Westbrook Partners may not have closed any significant deals for more than 18 months, but it doesn’t mean the firm has been able to put its feet up for the past year. Not only did the New York-based firm close its eighth real estate fund on $2.5 billion last May, but Westbrook also hired five senior acquisition principals earlier this year as it seeks to deploy more than $3 billion in dry powder. Founded in 1994 by Paul Kazilionis, the firm has raised $6.74 billion across four real estate funds in the past five years. The most recent fund, Westbrook Real Estate Fund 8, closed in May last year with no investments to date. Added to around $800 million of dry powder from Westbrook’s $1.65 billion Fund 7 and the firm has plenty of firepower at hand. As part of Westbrook’s investment strategy for the next year, distressed real estate and debt opportunities in the US, Europe and Japan are high on the agenda, according to people familiar with the matter. To help in the matter, Westbrook appointed Matthew Kenney, David Finkel, Zubin Irani, Andrew Gummer and Kunihiko Okumura as principals and managing principals to work from its New York, London and Tokyo offices. Finkel, Irani and Okumura, formerly with iStar Financial, Goldman Sachs’ Whitehall Street Real Estate Funds and Lehman Brothers’ global real estate group respectively, are expected to help Westbrook target debt opportunities. Westbrook was also among the first GPs to offer investors in its latest fund, Fund 8, the chance to reduce commitments by up to 10 percent – without penalty. People familiar with the matter said at the time if some investors choose not to take the full reduction, others will be able to cut their commitments by more than 10 percent.
Number of real estate professionals 243
Total number of firm employees 320
Capital raised since inception $7.8 billion
Assets under management $11 billion
Last June, MGPA completed its biggest fundraising effort to date, closing its MGPA Fund III on $5.2 billion of equity. The fund included the largest-ever third party capital raise dedicated to Asia at $3.9 billion. The remaining equity raised was targeted at Europe. The firm won PERE magazine’s Global Fundraise of the Year award for managing such a colossal tombstone. But it was just one of a haul of
awards the firm took home, including Asian Firm of the Year and Asian Industry Figure of the Year for its Asia investments chief executive Simon Treacy. Under the leadership of chief executive officer Jim Quille, MGPA seems to have had little problem sourcing deals for its funds. In Asia, the firm had already
invested $2.2 billion of its $3.9 billion fund at the time of the final close last June. The investments were predominantly made in Singapore and Japan. The firm though is in keen investment mode, last month agreeing a $538 million deal in Kuala Lumpur.
12. CBRE Investors
Headquarters Los Angeles
Number of private equity real estate professionals 250
Total number of firm employees 383
Number of private equity real estate investments 148
Assets under management $38.5 billion
CBRE Investors has catapulted itself up three positions in this year’s PERE 30 following the close of the firm’s first multibillion dollar fund. The Los Angeles-based firm led by Vance Maddocks is now flush with capital having closed its Strategic Partners US Value 5 and Strategic Partners US Opportunity 5 funds on $2.1 billion last May. At the start of 2009, the firm put the value-added fund to work acquiring a three-building portfolio of office properties in Los Angeles, New Jersey and Florida totalling more than one
million square feet. The office portfolio was acquired from an ING open-ended fund for about 40 percent discount. CBRE Investors, however, is also expanding its global reach. In August, the firm opened an office in Amsterdam and followed that several months later with the appointment of Charles Wardroper as managing director in Poland. The firm is also opening an office in the Manama region of Bahrain for Middle Eastern investments.
13. AREA Property Partners
Headquarters New York
Number of private equity real estate professionals 93
Total number of firm employees 127
Capital raised since inception $12.2 billion
Number of current portfolio investments 188
AREA Property Partners’ recent rebranding from Apollo Real Estate Advisors has not affected the firm’s fundraising momentum. Its PERE 30 fundraising total has hit $6.08 billion with the 2008 close of its opportunistic vehicle, Apollo European Real Estate Fund III, on $1.375 billion. The fund is being used to target AREA’s traditional focus: that of distressed investing. The Bill Mack and Lee Neibart-led firm was founded in 1993 to take advantage of the US savings and loan crisis and the sale of assets by the Resolution Trust Corporation (RTC). In March this year, Fund III invested in a portfolio of UK properties once belonging to the collapsed property empire of Dawnay Day, alongside F&C REIT Asset Management, a London-based company which AREA has used as a local operating partner in many previous deals. In late 2008, the fund also bought approximately half of UK property company and fund manager Capital & Regional’s German portfolio and completed the buyout of the majority of the equity interest that subsidiary Hahn Group held in the German business.
14. Rockpoint Group
Number of real estate partners 4
Capital raised since inception $5.56 billion
Rockpoint sealed its status as one of the biggest real estate private equity firms last year when it raised $2.5 billion for Rockpoint Real Estate Fund III, targeting the US, Asia and Europe. Prior to this, the firm
managed to attract a total of $2.5 billion in two consecutive funds in 2004 and 2005. Despite its size, though the firm remains deliberately low profile as the absence of a web site attests. Established in 2003, the firm is now run by four of the five original partners including Bill Walton, Greg Hartman, Keith Gelb and Pat Fox. Together with Jonathan Paul, the partners all originally worked at Westbrook Partners. Public details about current investments are sketchy, but it is known that Rockpoint Real Estate Fund III has invested part of its equity in a joint venture created with London’s Longbow Real Estate Capital. That vehicle is designed to invest in UK property. Rockpoint and debt specialist Longbow signed the JV to invest in debt opportunities, secondary commercial mortgage backed securities as well as recapitalising property companies. According to an Oregon pension fund, Rockpoint Real Estate Fund I and II generated estimated gross internal rates of return of 43.9 percent and 24.6 percent.
15. Prudential Real Estate Investors
Headquarters Parsippany, NJ
Number of private equity real estate professionals 176
Total number of firm employees 580
Assets under management $44 billion
Prudential Real Estate Investors, the real estate investment arm of financial services company Prudential, is proof that you don’t need mega-funds to equal big bucks. The firm’s five-year fundraising total includes 17 funds of less than $1 billion apiece spanning Asia, Latin America, North America and Europe. Last summer, Prudential also formed four joint ventures, including partnering with Beekman Helix to form Pramerica BHI India to build the duo’s existing portfolio of 11 equity investments totaling $220 million. Prudential also teamed up with investment and development company L&L Holding Company to form a $500 million JV to acquire office properties in New York City. A $1 billion joint venture with private real estate investment and development firm Madison Capital was also formed to
acquire urban retail and mixed-use properties in New York City and other major urban markets. Finally, Prudential partnered with Mexican developer Grupo Concord to invest $800 million to develop 1,800 condominiums along the Sea of Cortez. In line with industry trends, Prudential is looking to deepen its debt exposure. In January, the firm absorbed the Paramount Private Equity team in a bid to build Prudential’s mezzanine platform in Europe.