ING has reached agreement with Richard Ellis to sell the majority of its Real Estate Investment Management (REIM) business for $1 billion.
In a statement issued today, the Dutch company said it was selling ING REIM Europe, ING REIM Asia and Clarion Real Estate Securities, ING’s US-based manager of listed real estate securities, as well as part of ING's equity interests in funds managed by these businesses.
In a second transaction, it confirmed rumours that ING has agreed to sell the private market real estate investment manager of its US operations, Clarion Partners, to that unit's management in partnership with Lightyear Capital for $100 million. Clarion Partners has €16.5 billion in assets under management as of 31 December 2010. Lightyear is a US-based private equity firm that specialises in investing in financial services companies and manages approximately $3 billion in committed capital. He added: “Our firms fit together well and our investment program offerings are highly complementary. The combined enterprise will further diversify our revenue sources and as the global market leader, we will redefine success in real estate investment management.”
The parts of ING REIM being sold to Richard Ellis amount to €44.7 billion of assets under management. Los Angeles-based Richard Ellis is to combine the parts of ING REIM it is buying with its global private equity real estate platform, CBRE Investors, which has $35.7 billion of assets. The combined business, therefore, will manage $96 billion.
The REIM business in Australia, ING REIMA, with €4.8 billion in assets under management as of 31 December 2010, is not included in these deals. Instead, the group will undertake a “phased withdrawal” from its Australian real estate investment management activities.
As part of the overall transactions, ING has agreed to sell up to approximately $100 million of its equity interest in existing ING REIM funds.
ING Insurance, a cornerstone investor in many of the vehicles, has agreed to continue its asset management mandate with Richard Ellis as the new manager of the funds. ING Bank will continue to have an equity interest in some REIM funds in Europe, Asia, the US and Australia. The equity stakes held by ING Bank will be sold over time as it continues to reduce its exposure to real estate.
Combined, the transactions are expected to result in an after-tax gain on disposal of around €500 million for ING, although final terms were subject to potential adjustments at closing. Both of the major transactions are expected to close in the second half of this year and are subject to approvals by “certain stakeholders” including regulators.
William Connelly, chief executive of ING Commercial Banking, said in a statement: “We are pleased to have found in Richard Ellis, and Clarion Partners management together with Lightyear, dedicated and solid partners to build on the leading positions of these REIM businesses and ensure continuity of investment teams in managing client assets in their best interests.”
Jan Hommen, chief executive of ING Group, said: “With these transactions we continue to deliver on our strategic objectives of reducing exposure to real estate, simplifying our company and further strengthening our capital base.”
CBRE said it was paying $940 million in cash to ING. The firm added CBRE Investors and ING REIM fitted together “exceptionally well”. CBRE Investors has primarily focused on value-add and separate accounts while ING REIM has primarily focused on core funds and global listed real estate securities funds, except in Asia, where ING REIM manages value add and opportunity funds.
There is also expected to be little overlap in the companies’ client bases, with a majority of CBRE Investors’ clients being U.S.-based and a majority of ING REIM’s based in Europe.
Brett White, Richard Ellis’ chief executive officer, said: “ING REIM, when combined with our existing global investment management operations, will provide us with a significantly enhanced ability to meet the needs of institutional investors across global markets with a full spectrum of investment programs and strategies.”
He added: “Our firms fit together well and our investment program offerings are highly complementary. The combined enterprise will further diversify our revenue sources and as the global market leader, we will redefine success in real estate investment management.”