RREEF, the real estate and infrastructure investment management platform of investment bank Deutsche Bank, is to call time on its opportunistic real estate investing business as further senior executives depart.
It is understood that Chris Papachristophorou, a managing director, the chief executive officer of the platform and a 15-year Deutsche Bank veteran, is to leave the bank by the end of the year alongside other senior executives from RREEF’s opportunistic real estate investing platform. Deutsche Bank declined to comment when approached.
He follows two other departing senior RREEF executives that have been responsible for the opportunistic real estate investing activities of the platform: RREEF's global chief investment officer Kurt Roeloffs and chairman David Brush. Roeloffs is also leaving by the end of the year while Brush has already joined competitor Brookfield Asset Management to lead its European real estate investing programme.
With the departures of Papachristophorou, Roeloffs and the other senior directors, RREEF’s focus is expected to shift to the core, larger parts of its business. As of the end of June, RREEF managed €41.3 billion of real estate across 22 offices globally. Of that total, €24.1 billion was classified as core.The core components of RREEF’s real estate business are principally made up of German open-ended funds, US private REITs and a global real estate securities business.
Just €2.6 billion of RREEF's assets were classified as opportunistic and the overwhelming majority of that was based in Europe.
While RREEF is winding down its opportunistic real estate investing activities, the firm will continue to actively manage the platform's existing assets and does have the capacity to take down opportunisitc investments when required.
The decision to focus on the core parts of its business follows a company-wide review by parent Deutsche Bank which concluded last month. While that review resulted in RREEF as a whole being regarded an integral part of a new Asset & Wealth Management division, question marks remained over what part in RREEF’s future strategy opportunistic investing would play.
Sources familiar with the situation told PERE that the bank, the platform and its personnel were becoming increasingly concerned about mounting regulation regarding the amount of equity needed by investment banks wanting to manage private equity real estate funds. They suggested that was one reason for opting to focus away from opportunistic investing.
It is also understood that the aborted sale of RREEF to New York-based investment manager Guggenheim Partners led to doubts over whether the platform would be able to raise capital from investors in the near term as they once again get used to it being an integral part of Deutsche Bank's operations.
There had been previous indictors that RREEF was downscaling its opportunistic investing activities. In March, the platform scaled down its US team in an apparent effort to focus on Europe where most of its opportunistic assets under management are located.
In 2009, RREEF shelved plans for its third and latest opportunity fund, RREEF Global Opportunities III. Originally aiming to corral $1.5 billion of equity commitments, the firm was responding then to high levels of uncertainty among institutional investors regarding blind pool, commingled funds and, importantly, high risk/return funds, in the wake of the start of the global financial crisis. The firm’s second fund, RREEF Real Estate Opportunities Fund II was raised in October 2006 and collected $1.6 billion.
By 2010, the firm was already scaling down its approach to opportunistic investing, its global chief executive officer Pierre Cherki telling PERE then how the firm aimed for it to account for just 25 percent of its total investments.