Penner issues rebuttal to PERE’s Friday Letter

In response to our opinion piece last week, the former head of CBRE Global Investors’ real estate finance business countered that his split from the firm wasn’t over differences in risk tolerance.

On April 6, PERE published a Friday Letter about the departure of Ethan Penner from CBRE Capital Partners. Focusing on the real estate veteran’s previous comments that he was more “entrepreneurial” than his former employer, the commentary examined the differences between Penner’s and CBRE’s historical approaches toward risk in real estate investments. Later that evening, Penner sent PERE the following rebuttal:

Dear PERE,

I read with great disappointment today's PERE opinion piece, which seemed to characterise me as a wild risk-taker. I could not let that stand without a reply.

I've been responsible for committing institutional capital for most of my 30-year career and have done so with varying strategies involving different risk and return targets. I'm not a risk-lover, as your article today suggests, but mostly I love finding and filling voids in the markets.  More often than not, the actual risk involved is small, but the perceived risk is misunderstood, which is why the strategy is in fact opportune.  This was true in the early years of CMBS in the early 1990s and was true in 2009 when commercial real estate debt traded at ridiculously cheap levels, reflecting the markets incorrect assessment of risk. In fact, when most were committing massive amounts of capital in 2006 and 2007, cavalierly ignoring risk, I mostly sat on the sidelines.

In point of fact, risk has little to do with my leaving CBRE Global Investors.  I am an individual who believes deeply in the value of the entrepreneurial spirit, especially the one that burns inside of me. In my career, I've been blessed with situations where I've been given tremendous entrepreneurial operating latitude and have produced mostly excellent outcomes, including building a wonderful debt investment business from scratch during these past four years at CBRE.

With the acquisition of ING Real Estate Investment Management, the current management of CBRE Global Investors has the challenge to manage the largest company of its kind in the world and understandably must do this with an approach that is anathema to the desires of an entrepreneur. This doesn't mean one approach is right or the other is wrong in any absolute sense, or that one is risk-averse and the other is not.  In fact, CBRE Global offers its investors the full array of investment options as to risk/reward, and the Capital Partners business offers investors the choice of two funds, each with different risk/return targets.

Characterising my leaving CBRE as being a matter of divergence as to risk tolerance is patently incorrect and does all involved a grave injustice.