JER Partners is in exclusive talks with LaSalle Investment Management to transfer its European team and private equity real estate funds business to the Chicago-based firm, say sources.
The two companies have been in detailed discussion for weeks as JER seeks a transition of its European funds platform in what one source described as a “bolt on” to another management house to give “stability” for investors.
According to those familiar with the situation, there is no guarantee of a deal, though talks have moved on in the past fortnight. Negotiations have centred around the current JER Europe team remaining together yet transferring to LaSalle to continue managing assets on behalf of investors.
Should a transfer of the platform occur, it would signify the winding down of JER in Europe having first opened an office in London in 1995. It would also be the second firm in quick succession to reduce its European presence after New York-based DLJ Real Estate Capital Partners decided to shut its European headquarters in London and transfer head of Europe, Carla Giannini to its global HQ.
JER Europe raised in first fund, JER Europe Fund I, in 1999 on €128 million of commitments. It made 9 transactions, investing in €2 billion-worth of assets. It followed up with JER Europe Fund II in 2003. That fund raised €123 million and bought €540 million of assets in six deals. In 2007, JER raised $321 million for the Marbleton Property Fund, a joint venture with Moscow-based Alfa Capital Partners to invest in Russia, Ukraine and other CIS countries. But JER Europe III – also raised in 2007 – is by far the largest fund. It held a final close on €809 million of commitments and made 17 investments in €1.9 billion of assets including co-investments.
Sources said performance of that largest fund had improved and had indeed been stable over the past 12 months. It invested in the Great Eastern Hotel in London, a site for residential development in Greenwich, London, a mixed use project in Germany, a prime residential apartment building in Paris, a retail warehouse portfolio in Italy, a hotel portfolio in Switzerland, Belgian real estate development company Immobel, a site for a warehouse development in Turkey, plus a stake in a UK house builder. That housebuilder was City Lofts, a UK city centre residential developer that subsequently succumbed to the property downturn. JER Partners also bought an Express by Holiday Inn at Stevenage in the UK to take the number of Express by Holiday Inns the firm operated in England to 12 after buying Morethanhotels in October 2007.
JER’s European funds business in Europe is run by Chester Barnes, former head of asset management in Europe, the Middle East and Africa at Merrill Lynch Global Principal Investments, who first joined JER Europe as head of asset management in 2008. Other surviving team members include Karim Habra. The former managing director at GE Real Estate’s Central & Eastern Europe business joined in September 2008.
According to the company’s website, Chester Barnes is managing director, European funds, Colin Blackmore is managing director and counsel, Karim Habra is also a managing director, while Claire Handley and Chris Zeuner are directors. Petr Kosar, Jean-Baptiste Meyer and Aleksander Obradovic are vice presidents.
Departures from the European business since the financial crisis include Angus Dodd, who joined Lone Star, Mark Chamieh who is co-head of global marketing and client services at Pramerica Real Estate Investors, Bill Hancock and Robert Kingsmill who left to set up Resolute Asset Management, Caleb Mercer, who recently joined HSBC Alternative Investments Limited (HAIL), and James Bury who left to join Pradera. Malcolm Le May, president of JER Partners in Europe, joined Matrix Group as chief executive of investment banking.
In its home US market, JER is said to be concentrating on its core strengths. It is becoming an increasingly active player in healthcare-related real estate, particularly in the skilled nursing sector, with the firm gearing up to raise a dedicated healthcare fund targeting up to $350 million of equity, according to people familiar with the matter.
JER declined to comment. LaSalle said it did not comment on market rumours.