Going continental

Three years ago, Brookfield Asset Management, then called Brascan Corporation, was involved in the last significant takeover battle of a large public property company in the UK.

In the end, the prize, Canary Wharf, was wrestled away from Brookfield by the $3.1 billion (€4.0 billion) bid of Morgan Stanley Real Estate and Manhattan-based property investor Simon Glick.

Despite the bruising encounter, Brascan kept a 17 percent stake in Canary Wharf, which has developed millions of square feet of offices for tenants such as HSBC, Lehman Brothers, Citigroup and Bank of America. Brookfield also has a majority shareholding in 20 Canada Square, an office property in Canary Wharf. Until recently, those were the only European investments for the Toronto-based firm.

But now, Brookfield has formed a joint venture with London-based bank Dawnay Day to buy office properties in Europe. Their first target: Germany.

The first acquisition is the forward purchase of a substantially pre-leased office building near Düsseldorf International Airport for more than €30 million. Phase one of the development, which is part of the Quartier complex, is 85 percent leased to Capgemini Germany. The smaller phase two, which will be ready for occupation in December, has a four–year rental guarantee from the vendor. John Humberstone, managing director of European real estate for Brookfield, says that the partnership will initially concentrate on Germany, but other locations will be considered.

He adds: “The 50/50 joint venture is [looking] to amass sufficient assets to set up a fund.”

Brookfield, which has a combined market capitalization of $17 billion, manages property, power and infrastructure assets. Last month, it sealed a deal to buy stricken US retail developer Mills Corporation for $1.4 billion.

Brookfield first signaled its intention to beef up its European real estate investment program last year when Scott Parsons joined as managing partner of European real estate. Humberstone joined last month. Parsons and Humberstone previously worked together at GE Real Estate. Parsons was most recently at British quoted property company Land Securities where he was business development director. Humberstone was director of new business at GE where one of his deals was the $358 million acquisition of Haslemere in 2004.

The Toronto firm chose Dawnay Day partly because of the bank's experience in Germany, where it bought property for an affiliate, Dawnay Day Treveria, which listed on London's Alternative Investment Market in December 2005.

Delancey launches €4bn fund
Delancey, the property fund manager run by Jamie Ritblat, son of UK real estate investor Sir John Ritblat, is launching a €4 billion ($5.2 billion) opportunity fund to invest in the UK and Europe. The elder Ritblat stepped down as chairman of British Land last year and will be chairman of the Delancey advisory board. He recently decided to chair the European Real Estate Private Equity Advisory Council at Lehman Brothers, as well. Delancey has already launched two funds, including one backed by George Soros.

ORN to focus on property derivatives
ORN Capital, the hedge fund backed by British fund manager Morley Fund Management, is to launch the world's first fund of property derivatives, as activity in the investment area increases. The total value of UK trades reached £3.7 billion (€5.6 billion; $7.2 billion) at the end of the third quarter of 2006, compared to £1.7 billion in the first quarter, according to figures from the Investment Property Databank. ORN is 56 percent owned by Morley, which itself is owned by insurance company Aviva.

Sparinvest raises $640m fund of funds
Danish investment house Sparinvest Property Investors has announced the final close of its latest fund of funds on $640 million (€489 million), which will make investments in private equity real estate funds focused on the US, Europe and Asia. Sparinvest Property Fund has already made commitments to two European-focused funds, two vehicles in the US and one in Japan. The fund hopes to be fully invested in 2008 with 12 to 14 fund commitments around the world.

First close for ING in east
ING, the Netherlands-based global property investment group, has raised €150 million ($197 million) in the first close of the ING Property Fund Central and Eastern Europe. ING's CEE vehicle is an openended fund targeting €1 billion of acquisitions. It hopes to return between 10 and 11 percent by investing in core and value-added real estate investments in Poland, the Czech Republic, Hungary, Slovakia, Romania and Austria, with a particular focus on the retail sector.

Investors cool on CEE
Interest in Central and Eastern European markets has “faded” according to the third annual survey of investment intentions by the European Association for Investors in Non-listed Real Estate Vehicles (INREV). Investors cited Germany as the most attractive market, followed by France and the Nordic counties, before Central and Eastern Europe. Spain, the UK and Russia are the next favorite locations. In a change from last year, office properties are the preferred sectors. Outside of Europe, the most popular countries to invest in are the US, followed by Japan, China, Singapore, and South Korea.