Blackstone closes BoA Merrill Lynch management deal

The Blackstone Group has officially closed a deal to take over the management of Bank of America Merrill Lynch’s $2.65 billion Asia property fund.

The New York-based firm said in a statement it agreed to take over as GP of the Asian Real Estate Opportunities Fund after Bank of America ruled the vehicle was not “core to its strategy for the region”.

This gives us a substantially larger platform … in a region where we see major growth going forward. Jonathan Gray and Chad Pike, co-heads of Blackstone’s real estate group

For Blackstone, the deal means absorbing between 25 and 30 members of the BoA ML platform’s approximately 50-person team. The Asia fund platform had staff working on investments spread across emerging markets, like China and India, as well as the region’s more established markets, like Japan and Korea.

Jonathan Gray and Chad Pike, co-heads of Blackstone’s real estate group, said replacing BoA ML as GP was a “very significant opportunity” for the firm, adding: “This gives us a substantially larger platform … in a region where we see major growth going forward.”

Earlier this month, PERE exclusively revealed that LPs in BoA ML’s Asia fund unanimously approved the bank’s offer of a $650 million settlement, following actions by the bank that were considered non-fiduciary.

The approximately 25-member investor pool rubberstamped the settlement at an investor meeting in Hong Kong in the week beginning 8 November, after it was provisionally agreed upon by the limited partners advisory committee (LPAC) in late August. The fund’s LPAC includes large LPs such as the Abu Dhabi Investment Council, the General Electric Pension Trust and French insurance group AXA.

The settlement came about after the limited partners of the fund objected to certain actions by BoA ML that they considered to be non-fiduciary. These included an ill-timed foreign exchange trade and some poorly executed valuations adopted when transferring real estate assets, previously held on the bank’s balance sheet, into the fund.

Commenting on Blackstone taking over as GP of the fund, Doug Sesler, head of BoA ML Real Estate Principal Investments, said the deal would “provide stability and leadership to help maximise investor returns”.

The majority of the BoA ML team to make the transition to Blackstone are expected to be asset management focused, rather than investment focused, as the fund is fully invested, sources have told PERE. The team will fall under the leadership of Blackstone’s Asia triumvirate of country heads Alan Miyasaki in Japan, Chris Heady in Hong Kong and Tuhin Parakh in India.