At a time when investment banks are spinning out their captive private equity arms, it's interesting to note that Mark Dawejko and Paul Dougherty are doing just the opposite. Several months after Dougherty formed real estate investment bank Perseus Realty Capital, the duo have launched Perseus Realty Partners, an affiliated private equity real estate firm based in Washington, DC.
Now, Dawejko and Dougherty are looking to raise $100 million for their debut investment vehicle, the Perseus Capital City Fund, which will invest in a wide variety of property types across the US with a specific focus on Washington, DC and the mid-Atlantic region. According to Dawejko, approximately 50 percent of the fund's capital will be deployed in those two regions.
The specific focus on the nation's capital is partially a reflection of the firm's extended network – both Perseus Realty Capital and Perseus Realty Partners are affiliated with private equity firm Perseus LLC, which counts former US ambassador Richard Holbrooke and former Fannie Mae chairman and chief executive officer James Johnson among its executive staff. In 2004, Perseus entered into the Washington DC real estate market via another affiliated firm Perseus Realty, a real estate investment and development firm run by Robert Cohen that has made six investments in the DC market – only one of which was widely marketed according to Dawejko. In the Capital City Fund, Perseus Realty Partners will have a right of first refusal to invest in any of the deals sourced by Perseus Realty – Dawejko anticipates that 25 percent of the fund's capital will be used to invest in those transactions.
“What we offer our investors is a direct avenue to Washington DC,” he says. “Our background and contacts not only give us the ability to source off-market deals in one of the country's hottest markets, but also, to offer our investors diversity in other markets as well.”
In addition to Dawejko, formerly co-head of Wachovia's high yield real estate investment platform, and Dougherty, formerly managing director of the Northeast Region of LJ Melody/CBRE Capital markets, the firm's investment team includes managing director Francis Rooney, formerly of Insignia/ESG, and director Thomas Hofheimer, previously with Fidelity Investments.
While the market in DC and surrounding areas has been competitive, Dawejko points out that much of the capital flowing to the region has been volatile. He also anticipates that Perseus Realty Partners' focus on small, mid-market deals will give it an advantage.
“We're not a billion dollar-plus fund so we have time to focus on the $15 million to $30 million deals,” Dawejko says. “That's our bread and butter.”
KKR partners to depart
Scott Stuart, a senior partner at Kohlberg Kravis Roberts and a board member of KKR Financial, the REIT that the private equity firm launched on the public markets earlier this year, is set to leave the firm at the end of 2005 along with fellow KKR partner Edward “Ned” Gilhuly. The two plan to start their own fund management business. Both Stuart and Gilhuly sat on KKR's investment committee and were seen by many industry observers as likely candidates to lead the firm after the eventual retirement of co-founders Henry Kravis and George Roberts. In a statement, Kravis said: “As entrepreneurs ourselves, we understand and respect the desire to start a new future and we wish them well in the future.”
New York Teachers' names RE head
The New York State Teachers' Retirement System, which oversees approximately $80 billion (€65 billion) in assets, has promoted John Virtanen to the position of real estate investment officer. Virtanen replaces John Campbell, who retired in August after being with the pension fund for six years. As of June 30, 2004, NYSTRS had approximately $5.5 billion in its real estate portfolio. For fiscal year 2004, the real estate asset class generated a return of 11.2 percent.
Liquid Realty hires CIO
San-Francisco and New York-based real estate secondary specialist Liquid Realty has made its third big hire in recent months by naming Jeffrey Giller a managing director at the firm. Prior to joining Liquid, where he will also serve as a managing partner, Giller was the chief operating officer at Somera Realty Value Fund, a value-added real estate fund run by Santa Barbara-based Somera Capital. He had previously been a senior manager with the J.E. Roberts Companies. Giller's hiring comes on the heels of two recent additions to the Liquid team: Andrew Jensen, formerly at private equity firm Gryphon Investors, and Josh Cleveland, formerly at private equity asset manager Capital Dynamics. Liquid Realty, run by Scott Landress, is currently investing its second fund which closed on $150 million in 2004.
New CIO, strong RE returns at Virginia
The Virginia Retirement System, the 27th largest pension fund in the United States with approximately $44 billion (€36 billion) in assets, has selected Charles Grant as the pension fund's chief investment officer. The choice of Grant, a 10-year veteran of VRS who had been acting CIO since March, was made after the board conducted a nationwide search that considered approximately 70 candidates. Grant's promotion coincided with the announcement of the pension fund's fiscal year end results. Overall, the fund generated a return of 12 percent, boosted by strong performances in real estate and private equity, which yielded 24.4 percent and 21.5 percent, respectively. As of June 30, 2005, Virginia Retirement had $1.8 billion in its real estate portfolio and $2.2 billion in private equity.
MSRE head moving up
Owen Thomas, head of Morgan Stanley Real Estate, will serve as acting president of Morgan Stanley Investment Management, the financial firm's $416 billion (€339 billion) asset management division, following the retirement of Mitchell Merrin. Thomas, who joined Morgan Stanely in 1987, will retain his leadership role with the real estate group during the search for a permanent successor to Merrin. In a statement, John Mack, the firm's newly appointed chairman and chief executive officer, noted that Thomas has doubled the revenues of Morgan Stanley Real Estate since taking over the group five years ago. them well in the future.”
AEW, Dow team up on Atlanta Hilton
Boston-based real estate opportunity fund AEW Partners V has acquired the 272-room Hilton Atlanta Northeast, alongside Seattle-based investment management company Dow Hotel. Terms of the transaction were not disclosed. DHS, which previously operated the hotel, will continue to manage the property and it will remain under the Hilton brand. Located in the Atlanta suburb of Norcross, the hotel will undergo a multi-million dollar renovation and upgrade program. The deal is the first collaboration between Dow and Boston-based AEW Capital Management, which has $21 billion (€17 billion) under management in real estate and securities in North America and Europe.
DDR, Macquarie to buy Mervyn's real estate
Publicly listed REIT Developers Diversified Realty is teaming up with Macquarie DDR Trust, a subsidiary of Australian investment bank Macquarie, in a joint venture to acquire the real estate assets of chain retailer Mervyn's for $396.2 million (€327 million). The joint venture will lease the space back to the retail chain for $30.5 million a year, or around $11.12 per square foot. The deal is comprised of 2.7 million square feet of retail space, all of which is occupied by Mervyn's. Approximately 70 percent of the space is in California, including 1 million square feet in Los Angeles, along with additional stores in Arizona, Nevada and Texas. Mervyn's was acquired by a consortium consisting of Cerberus, Lubert-Adler and Sun Capital last year.
Starwood acquires Le Meridien
Greenwich, Connecticut-based Starwood Hotels and Resorts Worldwide has agreed to acquire luxury hotel chain Le Meridien Hotels and Resorts for an undisclosed sum. Separately, Starwood is teaming up with LehmanBrothers to purchase London-based Le Meridien's portfolio of real estate assets, including more then 130 owned and leased hotel and resort properties in 56 countries. The transaction is expected to close this fall, before which Le Meridien will continue operating as an independent company under its current management. London-based private equity firm Nomura International's Principal Financial Group, then-led by Guy Hands, acquired Le Meridien in May 2001 from Compass Group for £1.9 billion
Dubai Investment acquires Essex House
Dubai Investment Group has purchased the Essex House Hotel from Strategic Hotel Capital for an undisclosed price. Located on Central Park South, the hotel is made up of two components, a 501-room Westin property and a 104-room St. Regis property, and will undergo a $50 million (€41 million) renovation. Plans call for 15 percent of the hotel rooms to be converted into condominiums, with the remaining 85 percent being converted into a luxury hotel property. Earlier this year, Longwing Real Estate Ventures, the US real estate arm of Dubai Investment, acquired the Sir Francis Drake Hotel in San Francisco and the Adam's Mark Jacksonville in Jacksonville, Florida.
Page Mill acquires Denver offices
San Francisco-based private equity real estate firm DivCo West has purchased the 274,582 square foot Lincoln Center office complex in downtown Denver. Terms of the transaction were not disclosed, but the sale price was reported to be around $36 million (€30 million). The 30-floor property has eight stories of parking and is currently 87 percent leased. The investment was made out of DivCo's Page Mill Properties Fund, which closed on $290 million in 2003, and is the firm's first investment in Denver. The seller in the transaction is Denver-based Integrated Properties.