CBRE Global Investors, the world’s biggest real estate investment management business, hooked the eyebrow this week with a curious announcement. The firm, which manages almost $91 billion of property around the globe and routinely grabs headlines for its big-money institutional mandates, released a statement on Wednesday about a mandate that it did not win.
The announcement drew attention to the fact that the firm has been appointed by French public service pension scheme ERAFP as a ‘stand-by manager’, following a request for proposals submitted last year to invest €350 million over three years in core European real estate.
As it turns out, the successful ‘active manager’ chosen by the pension was Paris-based AXA Real Estate Investment Managers, the real estate investment management business of French insurer AXA. Nevertheless, and in an unusual admission for an organization better accustomed to announcing its victories, CBRE felt compelled to tell the world “we’re delighted to have been chosen as a stand-by manager.”
LaSalle Investment Management, picked by ERAFP as the other stand-by manager, chose a different tact. The Chicago-based firm decided to say nothing. “We would only tout actual wins,” one LaSalle executive told PERE.
In as competitive a world as real estate investment management (indeed, the ERAFP tender was contested by no fewer than 15 firms) it would not seem an obvious choice to extol the virtues of sharing a silver medal. But that does not mean the announcement is without its merits.
“The press release may need some explaining,” admitted a spokesperson at CBRE. She went on to list the positives. For one, the firm still beat 12 other firms in winning one of three mandates going, even if the real prize would have been the active mandate.
Secondly, as the firm said in the announcement, it now has an official relationship with ERAFP, an institutional investor with an allocation to invest up to 10 percent of its €14 billion-plus assets in real estate. At the moment, AXA’s mandate, and a tester €40 million mandate awarded last year to AEW Europe, amount to its entire exposure to property. That leaves potentially more than €1 billion to invest. Through its announcement, CBRE effectively is demonstrating to the real estate investment universe its close proximity to the French investor.
Thirdly, the announcement is also a way to demonstrate the firm’s green credentials. In its own communiqués, ERAFP repeatedly emphasizes that it is a “100 percent SRI institutional investor.” AXA Real Estate, for its part, missed no tricks when underscoring its ability to improve the SRI ratings of the assets it acquires on ERAFP’s behalf. In its announcement, CBRE also referenced socially responsible investing as a key component of the mandate, inferring that it too would improve the environmental friendliness of the assets it would acquire for the pension, if given the chance.
That leads us onto one final merit. PERE understands that, should AXA Real Estate not be able to transact in certain sectors or should the relationship not work out generally, CBRE (jointly with LaSalle) has first dibs on picking up the reins. In publicizing its mandate, CBRE's announcement is serving as much as a warning to AXA to perform as it is a proclamation of success.
So CBRE didn’t win. But it still opted to position its runners-up prize in a positive light. Considering the above points, perhaps LaSalle could have done likewise.