Friday Letter The omen II

All signs are looking positive for the merger of CBRE Investors and ING REIM. 

Within 24 hours of the announcement that CBRE Investors was to merge with most of ING Real Estate Investment Management (REIM), Matt Khourie was on a plane bound for Europe. The chief executive of the Los Angeles-based investment management firm jetted over to meet up with ING REIM’s European CEO Pieter Hendrikse, and together two men met with REIM’s top two investors.

That Khourie was willing to board a plane and put the vision to ING REIM’s clients is a good omen for the combination and shows how much both firms want to make this work.

Apart from ambition, though, the fact that, on paper, the enlarged entity makes so much sense also is in their favour. CBRE Investors has 200 investors (or clients as Khourie likes to call them) and ING REIM has 400, but the key figure is the overlap among them is just 4 percent. It is quite remarkable that, given the size of the respective organisations, there should be so little overlap in terms of concentration, conflict and investment strategy.

The other omen that looks very promising is that even this week – just after the announcement was made – ING REIM received investment commitments from LPs for funds in marketing mode. That would seem to represent a vote of confidence. “The response from the investor community has been extremely positive this week,” said Khourie. “Pieter and I have been getting messages and emails from our major investors, and they are delighted about this acquisition.”

Perhaps it shouldn’t come as too much of a surprise that the combination seems to be finding favour among LPs, as well as staff at ING REIM. For a year or so, ING REIM staff have been assessing CBRE Investors and vice versa. Comments from the REIM asset manager in Italy to the investment professional in the UK to the controller in Sweden have been fed back to Hendrikse about who they wanted in terms of a partner. There is relief now that the uncertainly is over and the business has a future – albeit under a different name.

Through the acquisition of ING REIM, CBRE Investors has bought a European business in a region it was considered more of a boutique shop. It has purchased an Asian business in a part of the world where it has just one fund. It has acquired a large securities business where hitherto it had a modest one. It has gained a ready-made suite of core and core-plus funds when hitherto it had mostly value-added and opportunistic ones. It now has 600 investors when previously it had 200. But CBRE Investors says the Number One reason was the people.

If one doubts the sincerity of CBRE Investors when it says that was the primary reason it wanted ING REIM, then one need only await the details of the senior positions in the enlarged group. However, it looks like apart from Khourie as global CEO and Michael McMenomy as global head of investor services, the management team heading up EMEA, Asia and the securities business will be from ING REIM.

From the outside, this looks like egos are not getting in the way of what is best for business and, by definition, best for investors. That is probably the best omen of all.