Och-Ziff Capital Management, the New York-based hedge fund manager with $44.6 billion of assets under management, has consolidated its real estate division with a view to making a greater push into private European real estate markets, PERE can reveal.
According to sources, to pave the way for the consolidation of Och-Ziff Real Estate (OZRE), David Gillerman, who was head of European real estate, is understood to have agreed to leave by mutual consent.
To replace his function, the firm has embarked on a hiring program intended to bring aboard four to six more junior professionals in London who will report directly to president and senior principal Steve Orbuch, who is based in New York.
Orbuch joined Och-Ziff from Blackstone in 2003 to form OZRE. Since its founding, OZRE has raised two private equity real estate funds with more than $1.2 billion of equity committed by the firm and its investors. The platform is now raising its third fund, Och-Ziff Real Estate Fund (OZREF) III, for which it is targeting $1 billion in commitments. According to its first quarter results, OZRE had already collected $952.2 million for the fund.
It was unclear at press time exactly what proportion of OZREF III will be allocated to European investments. However, one PERE source said the firm sees a significant opportunity in Europe and are keen to take advantage of it by building up a team. “They see growth and, as such, are adding bodies,” he said.
Another source said the strategy of hiring more junior executives is more akin to hedge fund recruitment than other financial asset classes. He said: “Gillerman was a senior guy. They’ll want someone senior overseeing the junior guys in Europe. But they generally don’t like to hire lots of seniors. In that way, hedge funds are quite different to other organizations. They are happy to have guys in their 20s or 30s running their businesses. But they’ll want the grey hair of Steve Orbuch to oversee them.”
There are not expected to be hires for OZRE in Asia where the firm has not had a significant presence since it parted ways with a team led by former Morgan Stanley Real Estate Investing Asia head Zain Fancy in October 2010.
OZRE’s incoming European executives will be joining a firm boasting a “top quartile” performance from its first two real estate funds. According to a note by US pension The New Jersey Division of Investment (NJDOI) proposing a $100 million investment in OZRE Fund IIII, its first fund, raised in 2005, is generating net returns of 15.5 percent IRR and a 1.5x equity multiple, while its second, 2010 fund, is generating net returns of 20.2 percent IRR and a 1.2x equity multiple.
NJDOI said the strategy for Fund III is to pursue opportunistic real estate investments across the capital structure. Assets are expected to be split approximately 50:50 between traditional real estate assets like multifamily housing, offices, hotels and retail properties, and non-traditional real estate assets like gaming, distressed land and residential properties, cell towers, parking lots, golf courses, debt and senior housing.
OZRE declined to comment.