Blueprint: Remembering Sam Zell, GIC and Brookfield’s India acquisitions, ADIA hires head of Americas real estate

We remember Equity Group Investments chairman Sam Zell; GIC and Brookfield purchase two properties in India for $1.4 billion; ADIA adds a regional head of real estate to complete its senior leadership team in the asset class; and more in today's briefing, exclusively for our valued subscribers.

They said it

 “The main risk we are facing as real estate investors is obsolesence.”

Nathalie Palladitcheff, president and CEO of Ivanhoé Cambridge, on one of real estate’s primary risks as it relates to the ESG discussion. Palladitcheff was speaking on PERE‘s series of podcasts from its recent PERE Europe conference. Listen to them all here.

Remembering Sam Zell

Sam Zell speaking at a PERE event

Last Thursday, private real estate lost one of its most iconic individuals. Sam Zell, chairman of Equity Group Investments and other real estate businesses died at his home “due to complications from a recent illness,” his companies announced. Zell will be remembered most for his roles in two particular transactions in 2007: the $39 billion sale of Equity Office Properties, a collection of towers dotted over America, to Blackstone – the deal was seminal in the lead-up to and aftermath of the global financial crisis a year later – and the purchase of newspaper business The Tribune Company, which went bust a year later. He was also instrumental in the formation of the modern day real estate investment trust structure, which can be found in markets around the world. Outspoken on a variety of topics, his thoughts regularly made it into PERE’s coverage and at our conferences. For some examples, here are reports on his views on private REITs, Donald Trump and the GFC. Equity Group Investments also crafted a tribute video for Zell here.

What’s new?

GIC deepens exposure in India
Singapore sovereign wealth fund GIC has partnered with Toronto-based manager Brookfield’s India Real Estate Investment Trust to invest in India’s office sector as it continues to grow its presence in the country. The pair  purchased two large commercial assets, totaling 6.5 million square feet, from Brookfield Asset Management’s private real estate funds for $1.4 billion. The 50:50 transaction comes shortly after GIC acquired an IT-focused special economic zone from the Indian real estate firm Phoenix Group earlier this month. This is also GIC’s first joint venture with a public REIT in India, according to an announcement. “We expect growth in the India office sector to continue, driven by an established IT industry, increased focus by global corporations on digital adoption, and the availability of skilled talent,” Kishore Gotety, co-head of real estate in Asia ex-China for GIC, said.

Final piece of the puzzle
The Abu Dhabi Investment Authority has now replenished the senior bench of its global real estate team. Pritesh Patel, currently the chief investment officer of Americas Real Estate at Manulife, will join the Middle Eastern sovereign wealth fund this summer as head of Americas. He will replace Gerald Fung, who left two years ago after more than a decade at the organization, PERE previously reported. Fung’s exit was part of a wave of departures – including global head of real estate Tom Arnold, head of European real estate Pascal Duhamel and head of Asia-Pacific real estate Todd Rhodes – where ADIA was left without regional real estate heads for many months. That changed last year, when ADIA appointed Deutsche Bank veteran Drew Goldman as its global head of real estate and promoted Christophe Ben Naceur to Europe real estate head and Aditya Bhargava to APAC real estate head. Patel now completes ADIA’s revamped real estate senior leadership team.

Crow Holdings believes in retail
As offices are receiving the brunt of the criticism directed at the private real estate sector these days, it can be easy to miss the fact that sentiment toward various formats of retail property has improved. One firm warming to shops is Dallas-based Crow Holdings Capital which has been investing in small, neighborhood strip centers using capital from two funds – Crow Holdings Retail Fund I and Crow Holdings Retail Fund II – which attracted a combined $712 million beginning in 2015. The firm has now recapitalized the combined portfolio of “small-format, convenience-oriented, open-air, food and service shopping centers,” in a $1.8 billion transaction with an undisclosed global institutional investor. The firm says the deal proves the strength of certain retail despite the sector’s broader challenges. Indeed, Crow Holdings Capital and its investors have such belief in the asset class, they are planning to invest another $300 million of equity to grow the portfolio. “This was not a case of ‘invest this and let’s flip this in three years.’ This was, ‘Let’s invest in this portfolio. Let’s keep doing this,’” Michael Levy, chief executive, told PERE. Read our exclusive story here.

Trending topics

Pariah status reinforced
A survey of fund managers conducted by Bank of America adds to the turning sentiment toward commercial real estate investments. According to the bank’s monthly fund manager survey, 19 percent of globally are underweight to real estate, the lowest level of exposure since 2008. This marks a rapid U-turn of attitudes, given investor allocations were at a 16-year high just last April. There is also growing concern among respondents that real estate could be at the center of a systemic market event; almost half of the managers surveyed believe this to be the case. By comparison, only 8 percent view the downgrade of US sovereign debt as the main risk to financial markets at present.

Hey big extender
While the capital markets sentiment is generally negative, two of real estate’s biggest managers have managed to extend £780 million ($967.7 million; €897.8 million) worth of loans in the UK despite the volatility. New York-based Blackstone extended two loans: a £238 million loan that was part of a larger facility used to fund its purchase of student accommodation platform iQ in 2020; and a £323 million loan used to refinanced a portfolio of industrial assets. Meanwhile, Toronto-based Brookfield Asset Management extended a £211 million loan against nine retail parks in the country purchased in 2021. In all three cases, the bondholders voted to extend.

Data snapshot

The big get bigger
Global assets under management in the real estate industry fell to $4.1 trillion in 2022, per the 2023 Fund Manager Survey conducted by global industry bodies ANREV, INREV and NCREIF published last week. The findings show the trend of capital concentration among the largest managers continues to deepen, with the top 10 fund managers globally responsible for 47 percent of total AUM, up from 41 percent in 2021.


Tishman recruits Seoul trader
New York-based Tishman Speyer has hired its first investment professional in South Korea as part of the firm’s broader plan to accelerate its growth in Asia Pacific. Jerry Hyunjae Park [his LinkedIn here] will join the firm’s freshly minted office in Seoul as a senior acquisition director responsible for sourcing and executing new investment opportunities. Before this, Park spent five years as executive director of acquisitions and developments at South Korean real estate firm D&D Investment and three years as a global portfolio manager at state pension manager National Pension Service of Korea. Tishman Speyer started building its investment team in Asia-Pacific in June 2022 when it hired former UBS executive Graham Mackie to lead the expansion.

Investor watch

OPERS shifts to open-ended funds
Ohio Public Employees Retirement System is looking to rebalance the way it holds real estate assets. The Columbus-based investor had favored a direct relationship with its managers, with around 60 percent of its $11.8 billion real estate portfolio invested via separate managed accounts. OPERS, which approved an increase to its target allocation to the asset class from 10 percent from 12 percent in April, is looking to reduce SMAs’ share of its real estate portfolio to around 45 percent. Replacing SMA allocations will be open-ended fund commitments, which are expected to be increased from 25 percent to 40 percent, according to documents seen by PERE. Closed-end fund allocations will remain at 15 percent.

This week’s investor meetings
Tuesday, May 23

Wednesday, May 24

Thursday, May 25

Friday, May 26

Today’s letter was prepared by Peter Benson, with Jonathan Brasse, Evelyn Lee, Charlotte D’Souza, Christie Ou and Randy Plavajka contributing