Lehman may launch €6bn real estate fund

Reports of the new vehicle suggest the US investment bank may be increasingly eyeing the Asian markets.

According to a report in the Daily Telegraph newspaper, Lehman Brothers, the US investment bank, is set to boost its real estate fund products with plans for a €5.9 billion ($7.4 billion) private equity real estate fund, half of which could be invested in Asia.

Lehman Brothers is considering launching the new fund following the success of the bank's existing vehicle, which is run out of the US by Raymond Mikulich and Mark Walsh, co-heads of Lehman's global private equity real estate team. Gerald Parkes runs the firm's European operations.

So far, Lehman has managed to invest around two-thirds of its existing €2.4 billion fund, according to Mark Newman, chief investment officer for the global private equity real estate team, in an interview with PERE earlier this year. That is despite the fierce competition from investors for commercial property around the world.

Lehman Brothers would not comment on the report, saying it was “speculation.”

However, the newspaper insists that although a final decision about the new fund is unlikely to be taken until after Christmas, early stage discussions have occurred. By the time a final decision is made, the investment bank should have successfully invested three-quarters of its current fund, known as Lehman Brothers Real Estate Partners II.

Preparations for a new fund come at a time of huge fund raising by its rivals. Morgan Stanley Real Estate, for example, has recently closed its third special situations fund on $2.2 billion (€1.8 billion) and has already invested $1.2 billion of the equity commitments to date.

It is thought that Lehman's new fund would be run alongside the bank's $1.1 billion mezzanine fund.

Lehman's current private equity real estate fund invests between 15 and 20 percent of its capital in Asia, but senior real estate figures want to increase this weighting according to the Telegraph, possibly with as much as 50 percent of the new fund being dedicated to the region.

“One of the great things about working at Lehman Brothers is that we get a huge amount of support as we go out and try to break into new markets,” Newman told PERE earlier this year. “The bank is very supportive of us growing the footprint of the business.”

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