LPs are in 'shock'

With distributions from real estate funds at a minimum and general chaos in the financial markets, limited partners are struggling to come to terms with the new global situation, according to a conference in London. It does not mean though that the real estate fund management model is dead.

Limited partners are in “shock” but the real estate fund management model is far from dead, delegates at a London conference heard today.

Speaking at the IMN European Real Estate Opportunity and Private Fund Investing Forum, Van Stults, co-founder of European firm Orion Capital Managers, said almost no distributions by fund managers were being made and that investors were in “shock”.

Acknowledging the changes taking place, he said: “The world has clearly changed. The big asset managers such as investment banks are in the doldrums, so the question is 'Who will be the next great equity gatherers?'”

However, he added that the real estate fund management model was by no means over, pointing out that his firm had secured fresh LP commitments just this week and last week for its latest vehicle. “The system is not broken,” he added.

Speaking on the same panel this morning, Arnold de Haan, a principal at retail-focused private equity real estate firm Meyer Bergman, and Ric Lewis, chief executive of London-based Curzon Global Partners, both said a major driver of success was going to be track record, though the process of ascertaining performance remained a challenge within the industry.

Noel Manns, a principal at another London-based private equity real estate firm, Europa Capital, noted some LPs had been putting bigger bets on a smaller number of funds, but were now seeing problems as a result. He hoped medium-sized and smaller fund managers might benefit.

Malcolm Le May, president of JER Partners Europe, added that his firm was likely to be originating loans in 2009 to fill the gap left by banks.