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Carlyle to acquire Metropolitan Real Estate

The Washington, DC-based alternative asset manager is expanding into the real estate fund of funds business with its purchase of the New York-based firm.

The Carlyle Group has agreed to acquire Metropolitan Real Estate Equity Management, a real estate fund of funds firm with more than $2.6 billion in assets under management. The purchase would give the Washington, DC-based firm an immediate presence in the real estate fund of funds business, one of the few areas of alternative investing in which it doesn’t already have a presence. Officials at Carlyle and Metropolitan confirmed the deal, but declined to comment further.

Once acquired, Metropolitan is expected to become part of Carlyle’s Solutions Group, which already houses the firm’s multi-manager platform for private equity and hedge funds. That group was formed in the wake of the 2011 acquisition of AlpInvest Partners and currently is led by managing director Jacques Chappuis, who joined Carlyle from Morgan Stanley earlier this year.

Similar to Carlyle’s acquisition of AlpInvest, the team at Metropolitan – including founders David Sherman and David Nasaw – is expected to remain mostly intact, although co-founder T. Robert Burke is expected to retire. According to one source, the firm also is expected to operate under its brand name following the acquisition, much like AlpInvest.

Through the acquisition, Carlyle will gain the management rights to all of Metropolitan’s vehicles, including nine funds in its US-focused Metropolitan Real Estate Partners (MREP) series and five funds in its MREP International series, as well as six feeder funds that provide exposure to both series and two distressed debt vehicles. Carlyle also is likely to gain new LP relationships, as it would have access to Metropolitan’s existing investors. The deal is scheduled to close in November.

Carlyle has been particularly active on the real estate front this year. In June, the firm launched its latest US opportunity fund, Carlyle Realty Partners VII, with an equity target of up to $4 billion – an amount that would represent its largest equity haul for property to date. The previous month, it launched its third pan-Asia opportunity fund, Carlyle Asia Real Estate Partners III, with a target of $750 million

Most recently, Carlyle hired Adam Metz as head of international real estate. Metz, who most recently served as a senior advisor to TPG Capital’s real estate group, starts next month in the newly created post, where he will oversee Carlyle’s real estate teams in Europe and Asia. For an interview with Metz on his new role, please see the October issue of PERE.