Followers of the sale of MGPA to BlackRock will be interested to learn that the global asset manager was actually one of approximately 20 firms on a shortlist of suitors to buy the Asia- and Europe-focused private equity real estate firm.
Although the sale is now official, the list of firms drawn by up MGPA’s advisor, the boutique investment bank Berkshire Capital, remains highly relevant as an indicator of which organizations are bullish on private real estate investment and on growing in the space. One of these firms in particular should stay on the radar of those keen to know where the next big corporate play is coming from.
Hartford, Connecticut-based Cornerstone Real Estate Advisors, the real estate investment management business of US insurance giant MassMutual, was a “very bullish” bidder for MGPA, according to one source with knowledge of the matter. While the firm declined to comment on its involvement in the MGPA sale, it confirmed to PERE this week that it indeed harbors ambitions to become a “truly global investment advisory business with investment management capabilities not only in the US and Europe but also in Asia.”
What do we know about Cornerstone? It was founded in 1994, originally to manage MassMutual’s equity real estate equity investments. However, it was in 2009 that the firm really grew into one of North America’s most active investors across the capital stack as MassMutual merged Cornerstone with its real estate finance business, Babson Capital Management. That same year, Cornerstone also took a step forward in Europe with the purchase of Protego Real Estate Investors, the London-based private equity real estate firm, in deal that grew its assets under management by $2.5 billion to about $30 billion.
Today, Cornerstone’s AUM is closer to $40 billion. Still, with just about $2 billion of assets in Europe, its thirst for global expansion is barely quenched. The purchase of MGPA – with its $13 billion of assets in Asia and Europe, its 220 staff and offices in Frankfurt, Paris, Luxembourg, Warsaw, Copenhagen, Singapore, Kuala Lumpur, Hong Kong, Beijing, Shanghai, Tokyo and Sydney – would have been a snug fit with minimal strategic overlap. Alas, it was not to be.
So, while BlackRock Real Estate fluffs the pillows for its new bedfellows at MGPA – the acquisition does not actually complete until the third quarter – the big question for Cornerstone is who is left to buy? At a scale that would be meaningful for a group as large as Cornerstone, the options are few and far between, particularly in Asia. The genesis of MGPA’s sale to BlackRock happened after its own growth ambitions became frustrated by a lack of options, according to the firm.
In the first exclusive interview with MGPA’s chairman James Quille and BlackRock’s global head of real estate Jack Chandler (look out for the June edition of PERE), Quille said private equity real estate’s competitive landscape still is full of broken businesses, but many would have inherited his firm more problems than added value. Chandler claimed to see similar things, adding that he has met with “probably 50 firms interested in a strategic partnership, being acquired, having someone raise capital for them or even having someone bail them out” in the two years since he left LaSalle Investment Management to take the helm at BlackRock. MGPA was the first firm “where we read more than a teaser,” he said.
Cornerstone can be thankful that in BlackRock – and for that matter, Ares Management, the Los Angeles-based alternative asset manager that bought AREA Property Partners earlier this month – there are less firms hunting for corporate acquisitions to grow in the market. The bigger challenge for Cornerstone will be finding a meaningful corporate acquisition in the first place.