A Bear market

Michelle LeRoy has certainly seen a lot in the past 15 years. The real estate veteran got her start in the business as an accountant with both Arthur Andersen and Kenneth Leventhal, which was later acquired by Ernst & Young. At E&Y, LeRoy became a senior manager in the real estate opportunity funds business before joining Citigroup as part of the financial institution's effort to launch a real estate fund of funds business. Later, she became head of investor relations for the real estate investment trust SL Green and its affiliate Gramercy Capital. And, then, in 2006, she joined Crane Capital, a London-based placement agent focused on alternative assets to help the firm build out its real estate fundraising capabilities.

“Over the past 15 years, we have seen an accelerated maturation in the real estate industry which has resulted in tremendous availability of public and private opportunities globally,” LeRoy said. “As LPs began developing their investment programs in response to these opportunities, it became obvious there was a market gap for intermediary fundraisers.”

As if to underline that sentiment, Crane Capital was acquired by Bear Stearns earlier this year as the part of the investment bank's efforts to boost its alternative investment fundraising activities. Paul Sanabria, senior managing director of Bear Stearns Asset Management, calls the deal a “transformative transaction,” adding that the combined group now encompasses more than 20 professionals in five offices around the world. Prior to the Crane Capital acquisition, Sanabria noted, Bear Stearns had a relatively modest staff of four to five professionals focused primarily on US middle market private equity firms.

The addition of Crane Capital has also helped Bear Stearns broaden its business lines to include real estate, but the firm's expansion will place it in direct competition with a growing number of firms. In addition to independent placement agents, investment banks such as Credit Suisse and pseudo-investment banks such as The Blackstone Group have significant market positions in the real estate and private equity fields. But LeRoy and Sanabria feel confident that their global platform gives them an edge.

“We are in the business of connecting great managers with sophisticated investors,” Sanabria said. “If you want to participate in that process, you need a global footprint.”

Thayer beefs up
Thayer Lodging Group, the Annapolis, Maryland-based private equity real estate firm that specializes in hospitality investments, has hired Bruce Wiles as a managing director. Wiles, who has 30 years experience in the hotel sector, was most recently chief executive officer of Alcor Acquisition, the successor company to Meristar Hospitality, a hotel REIT that was acquired by The Blackstone Group last year. Thayer, which was co-founded by Fred Malek and Lee Pillsbury, recently added another managing director, Bill Reynolds, who previously worked at Hospitality Capital Partners, a private REIT sponsored by USAA Real Estate.

Investcorp hires US property pro
J. Michael O'Brien has joined global alternative investment firm Investcorp as a principal in the US where he will oversee the firm's real estate asset management business on the East Coast. Before joining Investcorp, O'Brien was a director with ING Clarion. O'Brien previously held positions with Reichmann International/Quantum Realty Fund, Equitable Real Estate Investment Management and Jones Lang Wootton Realty Advisors, according to a statement released by Investcorp. The firm has more than $3.5 billion (€2.7 billion) invested in the US property markets.

Allstate lures Illinois private equity LP
Allstate Investments, the investment management arm of the life insurance company, has hired Joy Winterfield as a portfolio manager in the company's private equity real estate division, which is headed by Edgar Alvarado. Winterfield was previously with the Illinois State Board pension system, where she was a portfolio manager in the pension fund's private equity group. Allstate has recently ramped up its efforts in the private equity real estate asset class in order to reach $1 billion worth of commitments each year. The Northbrook, Illinois-based institutional investor recently committed to funds managed by Beacon and The Blackstone Group.

Palisades adds VP to boost fundraising
Fort Lee, New Jersey-based real estate investment banking firm Palisades Financial has hired Martin McGinley as vice president of institutional sales and marketing. McGinley has spent the past ten years as vice president of institutional equity sales trading at Knight Capital Markets. At Palisades, McGinley will help the firm expand its investor base for Palisades Regional Investment Fund II, a $200 million (€154 million) real estate fund focused on first mortgages, bridge, mezzanine and equity financing.

JER names mezzanine lending co-heads
JER Investors Trust, the publicly listed specialty finance company managed by McLean, Virginia-based real estate investment firm JE Robert Company, has named Jeffrey Wiseman and Kevin Walsh as co-heads of mezzanine lending. Wiseman was hired from JP Morgan, where he was a vice president involved with subordinated real estate debt products, while Walsh, who joined JER last year, was previously with Wells Fargo.

Blackstone sells Extended Stay for $8bn
New Jersey-based private real estate company The Lightstone Group has agreed to acquire US hospitality chain Extended Stay Hotels from The Blackstone Group for $8 billion (€5.9 billion). An active investor in the hospitality space, Blackstone acquired the Extended Stay portfolio via a number of different acquisitions. Its largest purchase was the acquisition of Extended Stay America, which it bought in 2004 for $1.9 billion and the assumption of $1.1 billion in debt. Extended Stay Hotels is the largest owner of mid-price, extended-stay lodging properties in the US with 683 hotels and around 76,000 rooms in 44 states and Canada.

Angelo Gordon in $405m recap
New York-based private investment firm Angelo Gordon and Washington DC real estate company Federal Capital Partners have announced the sale and recapitalization of a portfolio of multi-family apartment buildings in a transaction valued at $405 million (€303 million). Of the five properties in the 3,600-unit portfolio, three Maryland properties were sold to an unnamed private investment firm, while two were recapitalized and will continue to be redeveloped by Federal.

Apollo Investments buys hotel REIT
Publicly traded business development company Apollo Investment Corporation, an affiliate of private equity firm Apollo Management, has acquired hotel real estate investment trust Innkeepers USA for $1.5 billion (€1.1 billion). The investment firm is paying $17.75 per share of Innkeeper stock and the assumption of the REIT's debt. The hotel company owns 27 assets with 10,259 rooms in 21 states and the District of Columbia. The properties are branded under the Residence Inns, Summerfield Suites and Hampton Inns banners.

KTR acquires industrial portfolios
Private equity real estate firm KTR Capital Partners, founded by the management team from industrial REIT Keystone Property Trust, has acquired 23 buildings in Chicago and four properties in the suburbs of Nashville. The $107-million (€79 million) Chicago acquisition is comprised of 1.9 million square feet of industrial space near O'Hare International Airport on the city's Northwest side, bringing KTR's property holdings in the city to 4 million square feet. In Nashville, the firm acquired four industrial properties in the northern suburb of Portland, Tennessee for an undisclosed sum in an unrelated deal.

Green Courte buys manufactured housing
Chicago-based private equity real estate firm Green Courte Partners has acquired a trio of manufactured housing communities in Colorado. Details of the transaction were not disclosed, but the firm now has controlling stakes in 20 housing communities. This latest acquisition gives Green Courte 750 more sites: Skyline, located in Fort Collins, is a senior-oriented, 175-site property; Swan Meadow Village is a 172-site, all-age property located in the resort area of Dillon; and Valley View is a 408-site, all-age property located in the Denver suburb of Thornton.