The New York-based private equity firm Dyal Capital Partners, a division of the investment firm Neuberger Berman Group, has made a strategic minority investment in the London-based real estate investment management firm Round Hill Capital, further expanding its exposure to the real estate sector.
This transaction marks Dyal’s second minority stake purchase in a dedicated real estate firm. In September 2016, the firm invested in the Miami-based private equity real estate firm Starwood Capital Group. Both investments are passive, non-voting minority stakes not affecting the ongoing management of the companies.
Some of Dyal’s other investments out of 32 minority partnerships completed since the firm was established in 2011 have been in more diversified companies that have real estate operations alongside other business lines. These include firms like the Miami-based H.I.G. Capital, London-based Chenavari Investment Managers, and New York-based Atalaya Capital Management.
PERE understands that the Round Hill investment was made from Dyal Capital Partners II, a 2014-vintage $2.15 billion closed-end fund targeting venture capital and growth equity investments.
David Hodes, founder and co-managing partner of the global real estate advisory firm Hodes Weill & Associates, sees Dyal’s latest real estate investment as a way of getting further exposure to fund management, which continues to be a growth industry.
“Dyal is not out to be a dedicated real estate investor; they invest in successful asset management businesses,” Hodes explained. “It is a derivative of investing in real estate because of the success of that business particularly given that there a carried interest to be earned will tie back to how the real estate performs. It is really a private equity investment where you are backing a management team and the underlying business just happens to be fund management instead of cars, planes, or healthcare.”
The deal is the latest in the wave of M&A transactions being seen in the European real estate asset management space in recent years.
In February 2018 for instance, New York Life, the investment management business of New York Life Insurance Company, purchased a 40 percent stake in Tristan Capital Partners, the London-headquartered private equity real estate investment manager. In December 2017, Des Moines, Iowa-based Principal Global Investors, the asset management arm of Principal Financial Group, expanded in Europe with its acquisition of Internos Global Investors, a pan-European real estate investment management firm now rebranded as Principal Real Estate Europe.
“I think there is an enthusiasm of investing in European fund managers given that it is an interesting growth market. It has not yet diversified the way the US has into all the different products such as core and value-add, but we are starting to see that. The US market is relatively mature whereas the European still has a bit of good running ahead of it,” said Hodes, reflecting on the rising number of M&A deals.
He went on to add that if there were more opportunities to buy in Asia-Pacific, more M&A activity would be seen there as well.
Round Hill Capital has invested more than €6.5 billion ($7.2 billion) in real estate assets since its inception in 2002 and acquired and manages more than 100,000 residential units across Europe.