PERE NY: BlackRock, MGPA ‘once in a generation’ opportunity

Jack Chandler, head of global real estate at BlackRock, explained why the takeover of MGPA was a ‘lifetime event’ and also how global investors were looking to large asset managers to help find yield from alternatives during Day One of PERE’s New York event.

Jack Chandler, managing director and head of BlackRock’s Global Real Estate business, described the recently inked merger with MGPA as a ‘once in a generation’ opportunity and also explained how investor clients were looking towards large asset managers such as his firm to help it find ‘yield’ from alternatives.

Chandler was speaking in a one-on-one interview with PERE on Day One of the New York Summit 2013 held at the Convene Conference Center in midtown Manhattan.

Quizzed over the merger with MGPA that completed earlier this month, Chandler feted the lack of overlap between the groups helping BlackRock to expand its services to offer a value-added/opportunistic-tilted business.

Whereas MGPA has a large team in Asia, BlackRock did not employ one person in its real estate group in the region, pointed out Chandler, and while BlackRock manages a large US business, MGPA employed just one person in the country. Furthermore, MGPA did not have a high yield debt business, unlike BlackRock, while it also has a significant European value-add business in contrast to BlackRock that does not have a similar product. Instead, BlackRock manages the largest open-ended fund in the UK.

Since the merger, BlackRock has added 220 MGPA staff giving the combined platform more than 400 staff. The company has 18 offices now in the US, Europe and Asia and $23.5 billion of assets under management. It also has around 700 investors. Reports from various media have suggested that MGPA could have cost somewhere between $140 million and $200 million although this range has since thought to have been on the high side.

Chandler declined to comment on fundraising plans for the first opportunistic fund utilizing the MGPA team. However, it is known the investment periods for both of MGPA’s existing funds have been completing, pointing to the next fund coming sooner rather than later.

As well as describing BlackRock’s takeover of MGPA, Chandler also presented a bearish attitude towards job growth in the US, and highlighted the firm’s opportunistic approach to the residential sector, plus its focus towards debt.

But in a fillip to large asset managers generally, Chandler also explained the current approach of investors to alternatives.

BlackRock has approximately $120 billion in its alternatives division, and Chandler said: “In today’s world no-one’s business model works with traditional bonds. Investors are trying to figure out how to get yield.”

He added: “More and more investors are coming to us asking if we can offer a holistic solution, meaning they have a huge portfolio of treasuries but want to find an alternative way to generate good yield. I think that investors are really looking to shops like ours and asking how do I position my portfolio?”