Doughty Hanson to exit RE business

The London-based firm is to bring the curtain down on 12 years of opportunistic real estate investing and after managing out its second fund will concentrate its efforts on its core private equity business.

Doughty Hanson, the London-based private equity firm, has signalled its intention to cease real estate investing following a strategic review in the wake of the death of one its founders.

Nigel Doughty, one of the UK’s best known entrepreneurs, died one year ago, after which co-founder Dick Hanson resumed his role as head of private equity and executive chairman.

“As a result of this review, the firm will focus on its core business of private equity. No future funds will be raised for real estate or technology venture businesses,” the firm said in an announcement on the decision today.

Doughy Hanson’s chief executive officer, Stephen Marquardt, said the streamlining of its focus followed the creation of a partnership structure for the private equity business and was, therefore, “a logical step” and “in the best interests of our investors, the firm and its many stakeholders.”

He said: “We have spent considerable time speaking with our investors and reflecting on the future of the business. While we have had notable successes in both real estate and technology ventures, the real heritage of Doughty Hanson lies in its private equity business.”

The firm said its real estate team, led by head Julian Gabriel, would remain in place as it manages through its second European opportunity fund, Doughty Hanson Real Estate Fund II, which closed in December 2006 with commitments of €590 million.

The fund, which is currently projecting an equity multiple of 1.2 percent, is slated to expire in December 2016.

Should that projection be the ultimate outcome for the fund – which still has certain key dispositions to go – it would be lower than the commonly expected outcome for opportunity funds. However, the firm could point to investing into the global financial crisis, which rocked valuations and disrupted borrowing capabilities across the industry, as one major reason why.

While it would not mean investors lose money, it would mark a stark contrast to the performance of its first opportunity fund, which began investing from 2000 and into something of a bull run. That fund ended up generating a 42 percent gross IRR and a 4.1x equity multiple.

It was led by Marc Mogull who left the firm prior to the final closing of the second fund to launch a rival firm called Benson Elliot. Also London-based, Benson Elliot has since raised €845 million across two funds of its own.