North American Industry Figure of the Year
Quietly lining up a $900 million distressed real estate fund in one month, with nothing more to hand than your word, takes some
doing. But that's exactly what Colony Capital did in 2008 when it raised the Colony Distressed Credit Fund. Colony has a reputation of reveling in distress, as does its president Richard Saltzman. Credited with creating the first real estate opportunity fund, Saltzman should perhaps be considered a founding father of the industry. It's why he was hired in 2003 and it's undoubtedly why he was voted PERE's North American industry figure of the year. During 2008, Saltzman was front and centre of many of Colony's investments, including increasing the firm's stakes in French supermarket chain Carrefour and Europe's largest hotel owner Accor. As with most established firms, some investments will need help going forward, including Colony's Station Casinos which is considering bankruptcy protection, but as Saltzman said last year: “We always like distress.”
North American Deal of the Year
1. The Carlyle Group/Crown Acquisitions, 666 Fifth Avenue, New York
2. Goldman Sachs Real Estate Principal Investment Area/The Related Group, Hudson Yards, New York
3. Hines/MetLife Real Estate Investments, Transbay Tower development land, San Francisco
Location is key in real estate and you can't get much of a better location than 666 Fifth Avenue in New York. Housing upmarket retailer Abercrombie & Fitch's flagship store and the US National Basketball Association shop, 666 Fifth Avenue is one of the
666 Fifth Avenue
best retail properties in the city and prompted the Carlyle Group and Crown Acquisitions to pay a reported $525 million for the building's 90,000-square-foot retail section. The firms acquired a reported 49 percent stake in the retail condo in July from Kushner Companies. Kushner had bought the entire property two years previously for a record $1.8 billion. The retail sector is, of course, taking a hit in the current economic downturn, even in Manhattan. However when the shoppers return, it will be to the best – and most central – locations. You can't get more central than 666 Fifth Avenue.
North American Firm of the Year
1. AREA Property Partners
2. JER Partners
3. Morgan Stanley Real Estate
AREA Property Partners, recently renamed from Apollo Real Estate Advisors, is a firm that understands distress only too well.
The firm was founded in 1993 by William Mack and Lee Neibart in order to take advantage of the US savings and loan crisis and the sale of assets by the Resolution Trust Corporation (RTC). Today's market provides AREA with the chance to return to its distressed roots. The firm is now flush with dry powder after doing only a handful of select deals over the last two years. “This is no time to be a cowboy,” Neibart told PERE last November, insisting AREA would remain cautious in the short term. However when the firm does start investing capital more significantly you can expect AREA to be eyeing the real estate debt space, particularly larger banks and financial institutions eager to dispose of their real estate assets. The scale of the opportunity will no doubt be huge and AREA is ready to capitalise on it.
North American Exit of the Year
1. Harry Macklowe, sale of GM Building, New York
2. Prudential Real Estate Investors, sale of Chrysler Building stake
3. Fortress Investment Group, Michael Jackson Neverland ranch debt sale
It was an exceptional deal in more ways than one. When Harry Macklowe was forced to sell New York's prized General Motors building last year to Boston Properties, it marked an official end to the city's property boom. However, the exit also marked a remarkable feat for Macklowe himself, who fought against the odds to keep his property empire together. For four months, Macklowe had been at the centre of intense negotiations over the GM Building, finally selling the property in June 2008 for $2.8 billion. It was the highest price tag paid for a US building in 2008, and was more than twice the $1.4 billion Macklowe paid for it back in 2003. Macklowe's business had depended on the sale. After buying seven towers from Blackstone's Equity Office Portfolio for $7 billion, Macklowe found he was unable to repay his short-term, high-interest loans when the credit crunch hit. The GM Building enabled his property firm to live to see another day.
North American Fundraise of the Year
1. Morgan Stanley Real Estate Fund VII Global, $6bn
2. Lone Star Real Estate Fund I, $2.5bn
3. Rockpoint Real Estate Fund II, $2.5bn
A bright spot in the currently dismal world of fundraising is Morgan Stanley Real Estate Fund VII Global, which continues its
drive towards its $10 billion target. To date, Morgan Stanley Real Estate Investing has gathered $6 billion in commitments, with an additional $2 billion of capital soft circled. Despite pushing back the intended final close from September 2008 to the first quarter of 2009 at the request of limited partners, Morgan Stanley remains confident that it will get close to the original target. MSREF VII will certainly have plenty of deals to choose from, with a vast supply of dry powder and a mandate focused on distress and dislocation. Debt and equity investments of between $20 million and $1 billion will span developed and emerging markets such as China and India where demand for real estate assets outstrips the supply. The fund is also eying up corporate and government divestitures.
North American Placement Agent of the Year
1. Credit Suisse Real Estate Private Fund Group
2. Morgan Stanley
3. Probitas Partners
Credit Suisse saw some new faces last year as firms found it progressively more difficult to raise money from tried and tested sources. Some folks that wouldn't ordinarily go to a placement agent began doing so, and that has been helping the placement business in difficult times. The US still accounts for 50 percent of Credit Suisse's business, with some highlights including a final $1 billion-plus close for Five Mile Capital Partners II and $910 million for Cerberus' mostly US vehicle, Cerberus Institutional Real Estate Partners Series II, according to Credit Suisse managing director Walter Stackler. These are the kind of managers where capital has been flowing in the US. The market has clearly contracted and equity sources have dried up for a myriad of reasons, so the firm has decided to concentrate on advising established top performers. The firm will have to watch out for rivals coming up next year, though. For now, however, it can bask in glory.
North American Debt Provider of the Year
1. Bank of America
2. Sumitomo Mitsui Banking Group
Debt was not an easy commodity to find in 2008, especially in the last three months of the year. The collapse of household names such as Bear Stearns, Lehman Brothers and Washington Mutual provoked a wave of panic in the US financial system – with many institutions significantly pulling back on their lending habits and introducing much tighter borrowing requirements. The availability of credit, though, was not completely non-existent, with Bank of America among the leaders in North America, according to PERE readers. Scooping both the Global and North American debt provider of the year awards for its activities in 2008, Bank of America provided more than $7 billion in real estate loans and bought more than $20 billion in mortgage-backed securities in the fourth quarter alone. The merger with Merrill Lynch may have resulted in losses for Bank of America (the bank wrote down more than $3 billion in losses on Merrill's leveraged loan and commercial real estate portfolio in the last quarter alone), but it also gave the bank access to Merrill's significant commercial real estate lending operations, which in the second quarter had $7.9 billion of whole loans on its books. Over the past few years Merrill has also been among the largest residential real estate lenders in the US, having originated $29 billion of prime US residential loans through its global wealth management division as of June 2008.
North American Law Firm of the Year (Transactions)
1. Goodwin Procter
2. Clifford Chance
3. Haynes & Boone
As transaction counsel, Goodwin Proctor has in recent years helped deploy more than $43 billion into the global real estate market. The firm most notably deployed a team of 40 to work with BlackRock Realty on its record-setting $5.4 billion acquisition of Stuyvesant Town and Peter Cooper Village in New York City alongside Tishman Speyer Properties in 2006 and has certainly been busy ever since. Goodwin works to structure and close a wide variety of real estate transaction types ranging from single property and portfolio acquisitions to workouts, restructurings and distressed situations, as well as increasingly popular debt transactions including convertible and mezzanine debt and debt acquisitions. The firm has recently advised on deals including BlackRock Realty's formation of a joint venture with an affiliate of Berkshire Multifamily REIT, and its acquisition of Massachusetts apartment community Windsor Gardens at Norwood for $162 million. Goodwin also advised on Five Mile Capital Partners' acquisition of an $18 million junior participation in a $39 million mortgage loan and a $19 million junior participation in a $43 million mortgage loan from Natixis Real Estate. The team, which includes partners James Broderick, Dean Pappas and Christopher Price, also counts Brookfield Asset Management, Morgan Stanley Real Estate Investing, Rockwood Capital and financial services giant UBS among its clients.
North American Law Firm of the Year (Fund Formation)
1. Goodwin Procter
2. Clifford Chance
3. Paul Hastings
Although raising a private equity real estate fund is becoming an increasingly difficult proposition these days, Goodwin Proctor leads the pack in fund formation acumen. Fund formation is an interdisciplinary practice at Goodwin and the real estate fund formation team works closely with attorneys in the real estate, REITs and real estate capital markets group. The integrated approach enables the firm to help clients throughout the fund's life, from raising capital through liquidation. Goodwin's fund formation clients have included PERE's North American firm of the year, AREA Property Partners, as well as Beacon Capital Partners, which held a first close in April for its latest real estate vehicle, Beacon Capital Strategic Partners VI, targeting $6 billion. Beacon's predecessor vehicle, Fund V, closed on $4 billion in 2007. Goodwin's sector-focused clients have included HEI Hotels, which is preparing to deploy more that $500 million in dry powder from its third private equity fund, HEI Hospitality Fund III. HEI is targeting full service, upscale and luxury hotels in the US, Canada and Caribbean. Goodwin's US fund formation team has recently formed real estate funds including international opportunity funds, industry and geographically focused funds and emerging markets funds. The team includes such notable members as Robert Insolia, who was also a founding partner of Goodwin Procter's New York office, and Boston-based David Watson, who chairs the private investment funds practice.
North American Limited Partner of the Year
1. California Public Employees' Retirement System (CalPERS)
2. Yale University
3. Canada Pension Plan Investment Board (CPPIB)
It is the largest public pension in the US, and one of the largest investors in the world. The $174 billion California Public
Employees' Retirement System (CalPERS) has formidable influence when it comes to real estate investing. Led by Theodore Eliopoulos throughout 2008, CalPERS real estate team helped the pension achieve returns of more than 11 percent in the three years to June 2008. Eliopoulos was appointed interim chief investment officer of the pension in January this year. However, as a large direct investor in California land over the past few years, CalPERS admits the coming year will be difficult. In November, George Diehr, chair of CalPERS' investment committee, said the pension's US residential assets had lost 35 percent of their value, falling from an original cost of $9.3 billion to $6.1 billion as of 30 June. “This portfolio reflects the realities of today's market and accurately depicts readjustments of price and risk,” Diehr said. It was a fact of life for all LPs in 2008.
North American Advisor of the Year
1. The Townsend Group
2. Partners Group
3. Probitas Partners
There is a reason why The Townsend Group has won both the Global and North American advisor of the year categories: it's
an institution in the real estate industry. After all, when you're consultant to the $126.4 billion California State Teachers' Retirement System (Cal-STRS) you can expect to exert some influence. Townsend, cof-founded by Terry Ahern, won that mandate at the end of 2007 and has spent the past year closely advising the pension on its investments. However, Townsend was also focused in 2008 on further developing the industry's first opportunistic real estate fund index with the National Council of Real Estate Investment Fiduciaries (NCREIF). Tracking the performance of 326 open- and closedended funds with more than $455 billion in assets, the index uniquely breaks down core, value-added and opportunistic fund performance. For Townsend, 2009 will be a time for deploying dry powder, as cofounder Kevin Lynch said: “There are many opportunities today that won't exist 24 months from now.”
North American Developer of the Year
1. The Related Group
2. Hines Interests
When looking to team up on billion dollar initiatives, New York developer The Related Group has emerged as the partner of
choice. In May, Goldman Sachs Real Estate Principal Investments and the The Related Group received approval to acquire and redevelop the 26-acre Hudson Yards site in Manhattan's far West Side in a $1 billion deal. The JV has a 99-year lease on the site and plans to develop 13 buildings including offices, apartments, hotels, shops, parking and public spaces. The pair jointly took over the project just six days after real estate investment firm Tishman Speyer pulled out of it. The Related Group partnered on a second $1 billion initiative in February, this time with Philadelphia-based private equity real estate firm Lubert-Adler. The two launched a vehicle to acquire property and mortgages from developers, lenders and property owners in the Florida real estate market ranging from finished condominiums to raw land.