2010 PERE AWARDS: North America

NORTH AMERICA INDUSTRY FIGURE OF THE YEAR
Barry Sternlicht, Starwood Capital Group

NORTH AMERICA FIRM OF THE YEAR
Starwood Capital Group

NORTH AMERICA DEAL OF THE YEAR
General Growth Properties’ recapitalisation by a Brookfield Asset Management-led consortium

NORTH AMERICA LP OF THE YEAR
Teachers Retirement System of Texas

NORTH AMERICA FUNDRAISE OF THE YEAR
Angelo, Gordon & Co and GE Capital Real Estate, $1.25 billion Legacy Securities Public-Private Investment Fund

NORTH AMERICA PLACEMENT AGENT OF THE YEAR
Credit Suisse Real Estate Private Fund Group

NORTH AMERICA FUND OF FUNDS FIRM OF THE YEAR
Morgan Stanley Alternative Investment Partners

NORTH AMERICA DEBT PROVIDER OF THE YEAR
JPMorgan

NORTH AMERICA LAW FIRM OF THE YEAR (FUND FORMATION)
Goodwin Proctor

NORTH AMERICA LAW FIRM OF THE YEAR (TRANSACTIONS)
Kirkland & Ellis


North America INDUSTRY FIGURE OF THE YEAR
 1. Barry Sternlicht, Starwood Capital Group
 2. Jon Gray, The Blackstone Group
 3. Mike Fascitelli, Vornado Realty Trust

Barry Sternlicht may have led Starwood Capital Group in investing billions of dollars in pools of troubled loans and distressed properties last year, but the founder of the Greenwich, Connecticut firm was still cautious when it came to the asset class in 2010.

Sternlicht

Amid uncertainty over US economic growth and future growth in the real estate sector, Sternlicht was quick to warn against the concerted push for core assets in prime markets last year. With cap rates for some deals plunging below the 5 percent mark, he questioned how investors were underwriting such transactions. “It’s a little like 2007, when cap rates were plunging but cash flows weren’t rising,” he told PERE, adding that caution would be needed when investing in 2011 and 2012.

Despite the circumspection, 2010 was still a great year to be investing in real estate in the US. For Starwood, troubled loans, including mortgage portfolios from regional banks, were among the firm’s key acquisitions, with one highlight being the October purchase of the mortgage for the Viceroy hotel resort on the Caribbean island of Anguilla. Purchased for $122 million, Starwood snapped up the loan after lender Citigroup cut its losses. With an original face value of $380 million, the deal is just one example of why Sternlicht has been named North America Industry Figure of the Year.

North America FIRM OF THE YEAR
 1. Starwood Capital Group
 2. Brookfield Asset Management
 3. The Blackstone Group

When it came to closing deals in 2010, there was no one real estate sector that Starwood Capital Group preferred. In fact, other than distressed, there are few other words to describe the Greenwich, Connecticut firm’s playbook last year. From pools of troubled mortgages to the acquisition of foreclosed office properties, Starwood kept its mind open when investing.

For many, though, Starwood’s affinity with the hospitality sector shone through last year, despite making up just a third of the firm’s activity. Armed with $2.8 billion of equity from its latest global opportunity and hospitality vehicles, Starwood was a presence in the sector.

Capital wasn’t just flowing from Starwood’s private funds, though. The REIT, Starwood Property Trust, also was a big originator and acquirer of hospitality debt, originating a $138 million first mortgage for the reconstruction of the Hyatt Regency in New Orleans, which closed down in 2005 following Hurricane Katrina.

Of course, Starwood’s attraction to hospitality wasn’t just restricted to asset-level equity and debt deals. In 2010, the firm was probably best known for its entity-level play for the Extended Stay hotel chain. The firm ultimately lost out on that deal, but that has done nothing to dampened Starwood’s appetite for the sector. One of the firm’s first deals in 2011 was the acquisition of an office property in New York for $72 million with plans to turn it into a hotel.


North America DEAL OF THE YEAR
 1. General Growth Properties’ recapitalisation by a Brookfield Asset Management-led consortium
 2. Extended Stay Hotels acquisition by Centerbridge Partners, Paulson & Co and The Blackstone Group
 3. The sale of the John Hancock Tower by Normandy Real Estate Partners and Five Mile Capital Partners

When it comes to US deals in 2010, you can’t get much bigger than General Growth Properties (GGP). Nineteen months after first filing for bankruptcy protection, the troubled REIT finally emerged from Chapter 11 in November, thanks to an $8 billion recapitalisation led by Brookfield Asset Management and the restructuring of $15 billion of its debt.

A GGP mall

For the Toronto-based fund manager, the deal was notable not just for its size but also owing to the fact much of the equity came from Brookfield’s $5.5 billion Real Estate Turnaround Consortium. The club fund originally was closed in 2009 with pledges from a handful of institutional investors and sovereign wealth funds interested in targeting distressed real estate deals in a large vehicle, but without being confined to a traditional private equity real estate structure. By investing $3 billion of the consortium’s equity in GGP as well as a further $1.7 billion of capital from Brookfield’s balance sheet and in shares, the firm now holds a 38 percent stake in the US mall operator, as well as a 14 percent interest in the spinout of GGP’s development and non-core assets, now known as The Howard Hughes Corporation.

For Brookfield, the GGP deal was not just an opportunistic recapitalisation, it also was a means of helping the former bankrupt entity grow in the future. Indeed, Brookfield recently revealed it would help GGP’s core operations expand into Brazil, Europe and Asia.


North America FUNDRAISE OF THE YEAR
 1. Angelo, Gordon & Co and GE Capital Real Estate, $1.25 billion Legacy Securities Public-Private Investment Fund
 2. Starwood Capital Group, $1.8 billion Starwood Global Opportunity Fund VIII and $925 million Starwood Capital Hospitality Fund II
 3. Vornado Realty Trust, $550 million first close Vornado Capital Partners I

When Angelo, Gordon & Co. and GE Capital Real Estate launched their bid to raise money under the US government’s Public Private Investment Program (PPIP) in 2009, they knew it would be tough going. Not only was the market in the midst of a fundraising freeze, but both firms had relatively new stories to tell, with Angelo, Gordon’s residential mortgage-backed securities (RMBS) team having joined the firm in 2008 and GE Capital Real Estate only having made the decision to expand into third-party investment management that same year.

And yet, despite the challenges facing the firms, Angelo, Gordon and GE succeeded in raising the largest PPIP fund of all, corralling $1.25 billion of equity from 175 investors and topping their target of $1.1 billion. Backed by a government equity match and leverage, the vehicle, which is almost 90 percent invested today, has total firepower of around $5 billion.

Focused on legacy securities originated before 2009 with a triple-A rating at origination, the two fund managers adopted a different strategy by investing more of the vehicle in CMBS. With RMBS and CMBS investments each believed to represent 50 percent of the portfolio, PPIP fund benefitted from a dramatic narrowing of CMBS spreads between 2009 and 2010, bolstering returns to investors – and, of course, the taxpayer.


North America LP OF THE YEAR
 1. Teachers’ Retirement System of Texas
 2. Canada Pension Plan Investment Board
 3. California Public Employees’ Retirement System

When it comes to activity in 2010, it’s not just how much a limited partner commits to new strategies that is important but also how much is called from their existing deals. After seeing capital calls figuratively drop off a cliff in late 2008 and early 2009, LPs are now starting to see fund managers spend their dry powder as transactions begin to flow.

However, for the Teachers’ Retirement System of Texas, the volume of capital calls in 2010 wasn’t just a slight improvement over 2009 levels – it more than doubled. After seeing roughly $2 billion of equity called by its GPs in 2009, the $100 billion public pension saw a further $5 billion of capital called in 2010, giving Texas Teachers a major investment boost in what could prove to be some of the best vintage years of the downturn.

Of course, 2010 wasn’t just about capital calls for the Austin-based plan; Texas Teachers also allocated $4 billion of equity to new real asset investments, with much of the capital going to real estate. Among the most notable deals was the pension’s $500 million investment in the recapitalisation of General Growth Properties in July. The pension also made a variety of commitments to single LP core funds investing in the office space.

With a $9.3 billion portfolio, including $7.3 billion of private real estate, Texas Teachers’ real asset team is by no means US centric. In 2010, the pension also committed to three international vehicles with plans to commit to another Asia vehicle, as well as its first Brazil fund, in 2011.


North America PLACEMENT AGENT OF THE YEAR
 1. Credit Suisse Real Estate Private Fund Group
 2. Greenhill Real Estate Capital Advisory Group
 3. Park Hill Real Estate Group

When it comes to describing 2010 for Credit Suisse Real Estate Private Fund Group (REPFG), the phrase annus horribilis initially springs to mind. Faced with one of the toughest fundraising environments ever seen in private equity real estate, the placement team also suffered the departure of up to 12 senior members of its group – a situation that prompted its merger within the wider Credit Suisse Private Fund Group. It even left some pondering whether the real estate group was still in business.

However, not only was the New York-based group still in business, it closed one of the biggest real estate secondaries sales seen in years. Representing Harvard Management Company, REPFG reportedly helped the endowment offload partial interests in its $5 billion property portfolio, which included more than 40 fund positions. Led by global head Anthony Carpenito, REPFG also is believed to have helped CrossHarbor Capital Partners reach a first close on its Institutional Partners II vehicle, as well as corral equity for Angelo, Gordon & Co’s $550 million AG Net Lease Realty Fund II, according to SEC filings.

Recent filings show that REPFG also is raising Angelo, Gordon’s $1.5 billion AG Core Plus Realty Fund III, as well as its $2 billion opportunistic AG Realty Fund VIII vehicle – sure signs that there’s plenty of life in REPFG for 2011 and beyond.


North America FUND OF FUNDS FIRM OF THE YEAR
 1. Morgan Stanley Alternative Investment Partners
 2. Madison International
 3. Landmark Partners

Fundraising in 2010 was tough by anyone’s standards, but for fund of funds and secondaries vehicles the landscape was even rockier last year. Out of more than $24 billion of value-added and opportunistic capital raised in 2010, just a couple of real estate secondaries fund closed globally and Morgan Stanley’s Phoenix Global Real Estate Secondaries fund was one of them.

Stecher

With just nine investors, the $370 million Phoenix fund almost resembles a club format within a traditional private equity real estate structure. However, in terms of strategy, the fund can be a little less traditional, having the ability to make co-investment deals alongside GPs and other LPs in deals.

The primary focus of the vehicle, though, is in acquiring partial and full secondaries interests in global property vehicles with capital commitments of between $400 million and $800 million, or 10 to 20 properties. Led by chief investment officer Joseph Stecher, Morgan Stanley AIP’s real estate group has invested roughly a third of the Phoenix fund to date.


North America LAW FIRM OF THE YEAR (FUND FORMATION)
 1. Goodwin Proctor
 2. Clifford Chance
 3. Haynes & Boone

For the fourth year in a row, Goodwin Proctor has been crowned North America Law Firm of the Year for fund formation. Led by Robert Insolia in New York and David Watson in Boston, the firm’s Real Estate Fund Formation Practice advised on more than 35 real estate fund closings in 2010 with an aggregate of more than $7 billion in capital raised. 

Insolia

Notable examples of American fund assignments included representing Beacon Capital in the final closing of its $2.5 billion office property fund. Goodwin Proctor also advised on final closings for two vehicles sponsored by Cornerstone Real Estate Advisors, the $750 million Cornerstone Core Mortgage Fund I and a $500 million separate account called Cornerstone Core Mortgage Venture I.

And it looks like Goodwin Proctor will be going for win number five in 2011, as marketing activity is underway for more than 20 funds for which the firm represents the sponsor.

Those funds are targeting an aggregate of nearly $8 billion.


North America LAW FIRM OF THE YEAR (TRANSACTIONS)
 1. Kirkland & Ellis
 2. Paul, Hastings, Janofsky & Walker
 3. Greenberg Traurig

This time, the glory is all theirs. After sharing the 2009 title of North America Law Firm of the Year for transactions with Clifford Chance, Kirkland & Ellis proved its recognition was no fluke with an even stronger performance in 2010. Overall, the firm advised on more than $40 billion in transaction in 2010 and saw an overall increase in activity over 2009, when the mammoth GGP deal accounted for much of its volume.

Tomlinson

Led by Stephen Tomlinson in New York, Kirkland & Ellis was in the thick of some of 2010’s biggest deals. The firm advised Brookfield Asset Management on the creation of separate accounts for investors in its global Real Estate Turnaround Consortium club fund, whose investment in General Growth Properties was named Global Deal of the Year as well as for North America. Kirkland & Ellis also advised Archstone Smith Trust – the REIT jointly owned by the Lehman Brothers estate, Bank of America and Barclays – on the conversion of $5 billion of bank debt into preferred equity.

In other deals, Kirkland & Ellis represented Walton Street Capital on the sale of a 40 percent interest in the Houston Galleria mall, which valued the property at $1.5 billion. The law firm also advised Starwood Capital Group on two transactions: its acquisition of a 49.9 percent stake in Hersha Hospitality and its purchase of the Sea Island Company, a historic golf resort located off the southern coast of Georgia. Through bankruptcy auction, Starwood acquired Sea Island at a 60% discount to the $533 million par value of the mortgage and a further discount to the equity, which was wiped out.

North America DEBT PROVIDER OF THE YEAR
 1. JPMorgan
 2. Wells Fargo
 3. Federal Deposit Insurance Corp

JPMorgan’s Real Estate & Lodging Investment Banking group provides advisory and capital market solutions to the world’s most significant real estate, gaming and lodging companies, as well as select private real estate owners, developers and investors.

In June, JPMorgan came to market with a roughly $716 million CMBS deal, which at the time was the largest of five such deals completed since the financial crisis and just the second one of 2010. That deal was backed by 36 loans secured by 96 commercial properties. The bank returned to the CMBS market in October to top itself with a $1.1 billion securitization backed by 30 loans for 47 properties.