When the rules of the game change, sometimes you need a referee to intervene. It’s not that players are deliberately fouling one another, but when the rules change half way through a game, the referee can at least guide you to the final whistle.
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The private real estate funds world is no different to most sports. But instead of one man with a whistle, the referee will usually be a third party brought in to ensure closure on the issue of the day. David Hodes and Doug Weill believe they can be just that referee.
The former co-heads of Credit Suisse’s placement business launched their own advisory firm, Hodes Weill & Associates, in July, to act as advisors to private equity real estate GPs and LPs.
The firm also intends to source capital to help recapitalise and restructure fund managers and portfolio investments. Of course, the duo’s spin-out from Credit Suisse comes amid a plethora of other firms launching advisory businesses in the US.
What warrants attention this time, though, is the men behind the project. As two of the three co-founders of Credit Suisse’s Real Estate Private Fund Group (REPFG), Hodes and Weill were two of the most powerful placement agents globally. Since forming the group with Bill Thompson in 2000, REPFG has raised more than $40 billion in capital across 67 real estate funds. Between 2006 and 2008, the group accounted for 25 percentof the entire “agented” real estate fundraising market. It has also repeatedly been voted global placement agent of the year in the annual PERE awards.
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Doug Weill |
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Over the next 18 to 24 months, Hodes and Weill – who have also been joined by Credit Suisse alums Stuart Baldwin, Adam Handwerker and Tim McDermott – will focus primarily on advisory work. “Sometimes you need a third party to intermediate a discussion,” Hodes said. And with more than 270 first time real estate funds launched in the past four years
alone, there could be plenty of work to go around – not just with later entrants to the market, but also with more established players.
“If you look at the top 15 managers in the industry heading into the last downturn, only a handful are still in existence today,” said Weill. “We don’t think the industry is going to get turned over to that extent, but you are going to see a significant
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Doug Weill |
transformation of the landscape of the fund manager community.”
Initially, that transformation will involve fund managers recapitalising properties and portfolios, restructuring debt investments and transactions and possibly reorganising a fund or management platform: situations, Hodes and Weill said, that typically require negotiations between GPs and LPs.
“We sometimes find that GPs and LPs will participate in the same discussion and come away with very different interpretations. Bridging these different interpretations is where the challenge lies,” Hodes added.
As part of those efforts to stabilise funds and investments, Hodes and Weill also see the opportunity to begin sourcing and investing capital in fund managers and GPs – whether directly in fund portfolios or by recapitalising the GP entity.
“Given the current challenges in the real estate private fund market, managers need to think about stabilising their businesses and repositioning their platforms and funds to take advantage of the upcoming market cycle,” said Weill. “In the near term, fund managers also need to continue to incentivize their teams, which can be challenging when the value of carried interest has deteriorated. Investors are focused on their fund managers and expect that their GPs will maintain adequate resources and remain committed to a high level of service.”
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