LaSalle’s multi-manager takeover ‘makes all the sense in the world’

The acquisition would add $7bn in AUM to the Chicago-based firm’s already sizable platform, but industry observers are divided as to whether similar M&A transactions would follow.

LaSalle Investment Management is undertaking a double acquisition from Aviva Investors as the Chicago-based firm seeks to further expand its real estate platform.

The deal sees LaSalle lift out Aviva’s real estate multi-manager business, which oversees $7 billion in assets. Ed Casal, Aviva’s chief executive of real estate and co-founder of its global indirect real estate business, will lead the multi-manager division. The deal is expected to close by year-end.

David Skinner, Aviva’s managing director for real estate strategy and fund management, said the multi-manager business is one of the top five largest platforms globally.

“The attraction of a multi-manager business the size of Aviva is it brings scale to an existing platform,” he said. “A buyer might be attracted to the fact that the multi-manager business brings in capital with a different risk appetite, different clients. For some buyers, it may be that it’s complementary from a geographic spread perspective. Obviously, motivations will vary buyer to buyer.”

Jeff Jacobson, LaSalle chief executive

Jeff Jacobson, LaSalle’s chief executive, said the acquisition enhances the firm’s ability to offer third-party fund investing, joint ventures and co-investments.

“A strong multi-manager capacity has become increasingly important to LaSalle’s clients and our global footprint and expertise provide a solid foundation to strengthen the incoming global indirect capabilities,” he said in a statement last week.

LaSalle is also taking over Aviva’s role as fund manager of Encore+, the open-ended continental Europe fund that has been jointly run by the two firms for 11 years. Encore+ had a gross asset value of €1.7 billion and returned 8.3 percent on a net basis for the year ended December 31, according to investor documents reviewed by PERE.

The acquisition of Aviva’s multi-manager platform adds $7 billion to LaSalle’s total AUM, which will approach $70 billion by year-end. LaSalle’s other private real estate products include value-added fund series in the US and in Canada, an Asian opportunistic series, open-ended funds for the US, Canada and Europe and a custom accounts platform, along with various debt funds.   

Multi-manager evolution

“For LaSalle, the multi-manager deal makes all the sense in the world. It’s a business that’s all about scaling, and it’s hard to enter the market,” David Boyle, the co-founder of investment manager NW1 Partners and former managing director and chief investment officer of Morgan Stanley Alternative Investment Partners’ real estate team, another major multi-manager.

“To me, the big story is about the evolution in the space,” he said. “I’m not sure if multi-manager M&A is a trend – this seems more circumstantial. It’s nothing like 2005-2007, when everyone said, ‘We have to have a multi-manager business.’”

The formation of multi-manager platforms started picking up in the early 2000s, when firms such as Metropolitan Real Estate Equity Management, later purchased by Carlyle, began mirroring private equity’s approach to investing in funds of funds and other structures outside of commingled real estate funds.

One New York-based multi-manager recounted that the business looked strong at the time because, pre-global financial crisis, there was more capital than there were opportunities to deploy it. Investors that wanted access to small, niche funds often had better success through multi-managers.

However, the global financial crisis hit the multi-manager space particularly hard. Boyle cited issues including high fees and multi-managers’ lack of track record through cycles that led to multiple firms closing their multi-manager platforms in the ensuing years. Mesirow Financial, for example, pulled out of the space in 2015 to focus on direct real estate, PERE previously reported.

“In the wake of the global financial crisis, people realized the multi-manager business is not for everyone,” Boyle said. “It works better for major LPs, like sovereign wealth funds, to access part of the market they wouldn’t otherwise have.”

Post-GFC, investors saw better fit with multi-managers that invested both directly and through funds.

“The plain old, straight-up fund of funds model isn’t attractive, but a multi-manager strategy that can do both has a great place in institutional and high-net-worth portfolios,” the New York multi-manager said. “The markets recognized this is a product that’s helpful for small- and medium-sized institutions and for high-net-worth individuals. It’s easy to see why a group like LaSalle, which has a lot of different real estate products, would want to be in the space.”

While Boyle said that LaSalle’s acquisition was a circumstantial one-off, the other multi-manager disagreed with his assessment.

“I think you’ll see others doing the same,” he said, citing investors’ interest in using multi-managers not for diversification, but for portfolio construction. An investor with $5 million to allocate to real estate, for example, may benefit more from writing a single check to a multi-manager, rather than making multiple small commitments to various closed-end funds.

He added that would-be multi-managers need significant scale across product lines, making large institutions like Goldman Sachs potential candidates to add a real estate multi-manager business. “You’re going to see other people realize this is a good product if executed properly.”