Blueprint: Private real estate’s bad press, Bain’s latest Greek distress deal, KIA’s new global real estate head

Private real estate’s top managers and investors grapple with the repercussions from negative press coverage of the sector; Bain Capital makes another big NPL purchase in Greece; Kuwait Investment Authority appoints a longtime executive as its new global real estate head; and more in today's briefing, exclusively for our valued subscribers.

They said it

“We can’t hide in the basement, do deals and expect the performance to speak for itself”

Brian Kingston, CEO of Brookfield’s real estate business, commenting on the need for the firm to improve its communication, in PERE’s September Big Interview.

What’s new?

Headlines become headaches
The private real estate industry has faced a barrage of negative press coverage over the past year, amid interest rate hikes, falling investment volumes, rising vacancies and the US regional banking crisis, among other headwinds. These unfavorable headlines have in turn posed yet another challenge for many top managers and investors, as we report in PERE’s September cover story.

“Commercial real estate has a branding problem at the moment,” says Ryan Cotton, head of Bain Capital Real Estate, the real estate arm of Boston-based private investment firm Bain Capital, while Justin Pattner, head of KKR’s real estate private equity business in the Americas, tells us, “We have certainly increased communication with our investors.” For more on what industry participants had to say, including what the headlines are getting wrong about the sector, read the full cover story here.

All Greek to Bain
Greek distress is shaping up to be a major investment theme for Bain Capital. Last Thursday, the Boston-headquartered manager announced its fifth large-scale non-performing loan portfolio acquisition in the country with the purchase of Sunshine Leases, a Greek financial leasing subsidiary of Piraeus Bank. The leases in the portfolio – which has a gross book value of €500 million – are collateralized primarily by commercial real estate and hotel assets. In the European leasing sector, the firm has now amassed €2.8 billion of “gross book value receivables.”

Nikolay Golubev, partner at Bain Capital Special Situations, said in the deal announcement: “Bain Capital has been one of the early investors in the Greek non-performing credit market since the acquisition of HCL in 2014. We continue to believe Greece is one of the most attractive NPL and real estate markets in Europe.” Bain Capital has been one of the most active real estate fundraisers, rising to 20th position in PERE’s annual top 100 manager ranking.

London calling
Crosstree Real Estate Partners, a London-based manager targeting real estate investments in and around the UK capital, has closed its third and largest fund. With a final size of £481 million ($607 million; €563 million), Crosstree Real Estate Special Situations Fund III is the largest fund focused exclusively on the UK to have closed this year, and the fourth-largest among funds focused solely on Europe, according to PERE data.

Crosstree was founded by Sean Arnold, a former Starwood Capital principal, and Nick Lyle, a former Blackstone executive. The firm’s strategy blends value-add and opportunistic acquisitions with subordinated debt financing, but Lyle said the firm is seeing more opportunities on the debt side than the equity side at present. “As you would expect in an environment like this, there is a bit of a stand-off between buyers and sellers,” he told PERE. Read our coverage for more on what investments Crosstree has made through Fund III to date.

Trending topics

When WeWork hands back the keys
Since WeWork declared its intention to restructure to avoid bankruptcy last month, much has been made of the sheer size of its office footprint, particularly in Manhattan, where it has the largest concentration of locations. But in terms of what comes next for private real estate investors with exposure to the co-working provider, and how worried they should be, the gravity of the situation can only be assessed from building to building. Indeed, PERE spoke with two landlords that both had leases terminated early by WeWork but experienced very different outcomes: one sued the company for damages before re-leasing all of the space within a year, while the other put the property on the market. A lease with WeWork is “a sword of Damocles,” and even landlords with “bulletproof” leases with the company should be worried, says another manager. Read our analysis for more on the predicament facing some office owners.

Bright lights, big city
It is more lights, camera and action for Blackstone and its content creation real estate partner, Hudson Pacific Properties. Last week, the two firms – along with New York-based real estate investment trust Vornado Realty Trust, the City of New York, and New York City Economic Development Corporation – announced the formation of Manhattan’s first public-private partnership to develop a purpose-built studio campus at Pier 94. Blackstone will own 24.5 percent of Sunset Pier 94 Studios through its institutional core-plus real estate strategy, while Hudson Pacific will own 25.6 percent. Vornado, which contributed its long-term leasehold for Pier 94 to the venture, will hold the remaining 49.9 percent.

Blackstone and Hudson Pacific are also partnering on the development of Sunset Waltham Cross Studios, a film, TV and digital production center in the UK, and Sunset Glenoaks Studios, a studio facility in California, among other projects.

Asia’s private debt opportunity
The commercial real estate private credit market in Asia-Pacific has expanded significantly over the past decade and is “geared for accelerated growth,” according to a research report published by CapitaLand Investment Management. Although commercial banks still account for 70 percent of the region’s commercial real estate loans, total private debt assets under management grew from less than $20 billion in 2010 to more than $80 billion in 2022, the report showed. This expansion is “anticipated to persist, underpinned by the region’s emphasis on real asset developments and the growing requirement for alternative capital sources,” wrote authors Yu Jin Ow, CLI head of research, and Tara Wong, research manager.

In particular, Australia is expected to experience a surge in private credit opportunities, with an A$50 billion ($31.86 billion; €29.65 billion) funding gap projected between 2023 and 2025, according to the report. As the country’s major banks reduce their exposure to the commercial real estate loan market, private credit providers are expected to increase their market share from 10 percent in 2022 to 15 percent in 2025, CLI noted.

Data snapshot

Waiting room
In the 2023 edition of its annual survey of real estate investors published last week, German manager Union Investment found that 60 percent of respondents do not anticipate the transaction market to pick up significantly for at least another 12 months.


KIA appoints global real estate head
Nadia Al-Sharhan has been promoted to head of the real estate division at sovereign wealth fund Kuwait Investment Authority, according to an update in her LinkedIn profile earlier this week. Al-Sharhan has been with KIA for almost 17 years, previously serving as a senior investment manager. While the sovereign wealth fund is known for keeping a low profile in investment circles, KIA is also one of the oldest real estate investors in the world, having invested in the asset class since at least the 1970s. Among its property investments are fund commitments to London’s Henderson Park and its ownership stake in another London-based real estate manager, Cale Street Partners.

Investor watch

Oaktree gets the OK from Oklahoma
Los Angeles-based manager Oaktree Capital Management got a little closer to reaching the $6 billion target for its latest opportunity fund with an investment from Oklahoma Teachers’ Retirement System. The pension fund confirmed to PERE that it approved a $100 million commitment to Oaktree Real Estate Opportunities Fund IX at its August 23 board meeting. The fund, which was launched earlier this year, has also received the backing of New Mexico State Investment Council and Ohio State Highway Patrol Retirement System, which committed $150 million and $15 million, respectively, in April, and Nebraska Investment Council, which earmarked $64 million for the fund in June, according to PERE data.

This week’s investor meetings

Wednesday, September 6
Fresno County Employees’ Retirement Association 
Oregon State Treasury 
Imperial County Employees’ Retirement System (ICERS) 
Swiss Life 

Thursday, September 7
Omaha School Employees’ Retirement System 
Los Angeles Fire & Police Pension System 
State Universities Retirement System of Illinois 
Nebraska Investment Council 
Washington State Investment Board 
Teachers’ Retirement System of the City of New York 

Friday, September 8
Tacoma Employees’ Retirement System 
Indiana Public Retirement System 
San Diego City Employees’ Retirement System
San Joaquin County Employees’ Retirement Association 
State Universities Retirement System of Illinois

Today’s letter was prepared by Evelyn Lee, with Jonathan BrasseCharlotte D’Souza and Christie Ou contributing