2009 was a year in which private equity real estate professionals were put to the ultimate test. However, which firms, individuals and deals stood out from the crowd? Which firms positioned themselves to thrive amid the chaos of the property downturn? PERE and PERENews.com readers voted in their thousands trying to answer such a question.
Here we present the global results of the PERE Awards 2009.
GLOBAL INDUSTRY FIGURE OF THE YEAR
1. BARRY STERNLICHT, Chairman and Chief Executive Officer, Starwood Capital
2. John Grayken, Chief Executive Officer, Lone Star
3. Lou Jiwei, Chairman and Chief Executive Officer, China Investment Corporation
2009 was Barry Sternlicht’s year. Not only did the chairman and chief executive officer of Starwood Capital lead the most successful blind pool REIT offering of last year, but his firm also successfully raised $2 billion Barry
GLOBAL FIRM OF THE YEAR
1. BROOKFIELD ASSET MANAGEMENT
2. China Investment Corporation
3. Lone Star Funds
Whether or not club style investment vehicles work is a debate that raged on throughout the second half of 2009, but the notion of such clubs was barely on people’s lips until Brookfield unveiled its turnaround consortium. Announcing the vehicle on 12 August, Brookfield revealed it had managed to raise $4 billion (later to become $5 billion) of opportunistic investment capital for a global spending programme. The news came amid a backlash by the world’s largest LPs against investing in traditional private-equity style blind pool commingled funds. While others were cancelling or postponing their opportunity funds, Brookfield’s Real Estate Turnaround Consortium managed to attract investments of between $300 million and $1 billion from the likes of China Investment Corporation, Australia’s Future Fund, two of Canada’s pension funds and Singapore’s GIC, according to a report by The Australian. In addition, Toronto-based Brookfield – led by Bruce Flatt – and its sister company, New York-based Brookfield Properties Corporation co-invested $1 billion to the consortium themselves. While it is yet to announce any headline-stealing acquisitions, Brookfield’s strategy of enticing the world’s biggest investors into a club style vehicle clearly captured the imagination of PERE readers. Perhaps Brookfield’s real estate turnaround consortium will also mark a shift in paradigm for large-scale investment in the sector.
GLOBAL DEAL OF THE YEAR
1. JOHN HANCOCK TOWER, BOSTON
2. Lehman Brothers Japan non-performing loans acquisition
3. Songbird Estates recapitalisation
When the landmark Boston skyscraper, the John Hancock Tower, finally made it to foreclosure auction in March 2009 all eyes were focused on the outcome. However the attention wasn’t just owing to the fact that Reflection in
GLOBAL FUNDRAISE OF THE YEAR
1. BROOKFIELD REAL ESTATE TURNAROUND CONSORTIUM
2. Lone Star Real Estate Fund II
3. Orion Europe Real Estate Fund III
According to PERE estimates, a meager $30 billion of capital was raised for value-added and opportunistic real estate investment strategies in 2009. While not an apples-for-apples comparison, the very fact that Brookfield Asset Management could corral $5.5 billion for it’s turnaround consortium speaks volumes as to what the world’s largest investors want today. In August last year, according to report by The Australian, Brookfield managed to attract between $300 million and $1 billion apiece from China Investment Corporation, Australia’s Future Fund, Singapore’s GIC and a couple of Canada’s largest pension funds. Alongside sister company Brookfield Properties Corporation, it also threw in a cool $1 billion of co-investment capital, ensuring that, in total, this would be comfortably the largest pool of aligned capital in 2009. The capital was pooled to invest in equity and debt in “undervalued” real estate companies or portfolios which Brookfield could add value to by employing “operational restructuring, strategic direction, sponsorship, portfolio repositioning, redevelopment or its other active asset management methods”. Planning investments in North America – where the firm also runs a $1.8 billion real estate funds platform – Europe and Australasia, the consortium aims to make minimum equity investments of $500 million. Nothing else raised last year came close to competing with that kind of firepower.
GLOBAL DEBT INVESTOR OF THE YEAR
1. LONE STAR FUNDS
2. Five Mile Capital Partners
3. Ladder Capital
“Lone Star will be one of the biggest names in private equity real estate over the next three years.” These words, from a rival fund manager, came as PERE gathered research ahead of an inside look at Lone Star and its discreet leader John Grayken last June. Described by another fund manager as a “real estate monster”, the Dallas-based outfit found plenty of prey in 2009. In Europe, Lone Star acquired approximately €5 billion face value of loans, including a reported €2 billion-plus book from Credit Suisse. A significant enough number of these loans were in the UK, so it was little wonder that earlier this year, Lone Star expanded the London operation of its wholly-owned mortgage servicing platform Hudson Advisors. Distressed real estate platform acquisitions may have evaded Lone Star – not least, the residential REIT, New City Residence Investment Corp – but under the leadership of Asia head Takehisa Takamatsu, the firm captured approximately $10 billion of performing and non-performing loans from the detritus of Lehman Brothers for the bargain price of less than $300 million. Given the vast quantity of loans Hudson has to work through, continued expansion at Grayken’s “monster” is predictable and future dominance in this category would surprise no one.
GLOBAL RESTRUCTURING ADVISOR OF THE YEAR
2. Alvarez & Marshal
3. Houlihan Lokey
Where there is pain, there is Lazard. Last year, for example, the bank advised on the €14 billion restructuring of Spanish property developer Metrovacesa in one of its highest profile client briefs. The Richard
GLOBAL PLACEMENT AGENT OF THE YEAR
1. CREDIT SUISSE REAL ESTATE PRIVATE FUND GROUP
2. Probitas Partners
3. CP Eaton
2009 was a tale of two markets for placement agents globally. For much of the past year, investors largely stopped making new commitments as they reassessed their priorities and the market. Yet things changed in the final quarter of 2009, as it became apparent investors of all shapes and sizes were regaining liquidity. For Credit Suisse Real Estate Private Fund Group, led globally by group head Bill Thompson and co-heads Walter Stackler, Pamela Wright and Fredrik Elwing – the final few months of 2009 was marked by former real estate investors returning to the asset class. Indeed, about 50 percent of Credit Suisse REPFG’s activity in 2009 came from investors who had been absent from real estate over the past few years, helping the placement agent close funds with roughly $3.5 billion of commitments. Although down from the annual capital raising peaks of almost $9 billion, Credit Suisse REPFG’s fundraising tally – which included raising €1.3 billion for Orion Capital Manager’s Orion European Real Estate Fund III and $815 million for CLSA Capital Partners’ Fudo Capital II – was widely recognised by PERE readers as the reason why the firm should be awarded the title of not only Global placement agent of the year but also placement firm of the year for North America and Europe as well.
GLOBAL FUNDS OF FUND OF THE YEAR
1. FRANKLIN TEMPLETON REAL ESTATE ADVISORS
2. Partners Group
3. Aviva Investors
As both a GP and LP, funds of funds can offer a unique perspective on the world of private real estate Jack
GLOBAL LAW FIRM OF THE YEAR (FUND FORMATION)
1. CLIFFORD CHANCE
2. Paul Hastings
3. Goodwin Procter
Fund formation legal work is no longer just about private equity real estate fund launches. With fundraising severely constricted last year, law firms saw a significant portion of their time dedicated to fund advisory work as well. For Clifford Chance that involved some of the biggest developments in the private equity real estate fund universe in 2009, not least the disposition of Merrill Lynch’s Asian real estate investment management platform. The sale – which was ultimately shelved by Merrill Lynch – included the $2.65 billion Asian Real Estate Opportunity Fund. With more than 30 offices in 21 countries and 3,800 legal advisers, Clifford Chance has been a repeat leader in global fund formation work, last year also advising former Credit Suisse Real Estate Private Fund Group veterans David Hodes and Doug Weill on the launch of their new advisory firm, Hodes Weill & Associates. However, as larger institutional investors looked increasingly to separate accounts and club deals, Clifford Chance was also at the centre of a multi-billion dollar joint venture between Rockspring Property Investment Managers’ and National Pension Service of Korea to invest in prime London assets.
GLOBAL LAW FIRM OF THE YEAR (TRANSACTIONS)
1. CLIFFORD CHANCE
2. Kirkland & Ellis
3. DLA Piper
Global property deals may be down more than 70 percent from the peak of 2007, but for transaction lawyers at Clifford Chance the current real estate downturn has proved as busy a time as any property bubble. As investors work through their legacy acquisitions, firms such as Clifford Chance have focused much of their time on restructuring and advisory work. That will continue into 2010, according to corporate and securities partner Jay Bernstein: “We are not out of the woods by any stretch of the imagination.” For Clifford Chance, 2009 was a year when lawyers helped borrowers overcome a variety of issues. One such highlight was the conversion of NRDC Equity Partners’ $414 million SPAC into a retail-focused REIT after it was unable to acquire a real estate operating company in the required time. Delaware law demanded 100 percent of shareholders back the conversion, however Bernstein – working with partner and M&A co-chair Brian Hoffmann – said the firm was able to lower the threshold to a simple majority and allow non-consenting shareholders to get their money back in what he described as one of the “most gratifying, interesting and challenging transactions” he had taken on.
GLOBAL LIMITED PARTNER OF THE YEAR
1. CHINA INVESTMENT CORPORATION
2. The National Pension Fund of Korea
3. Oregon Investment Council/The Wellcome Trust (tie)
If there was one investor spreading the love in 2009, it was the China Investment Corporation (CIC). In the US, CIC is reputed to have committed $800 million to Morgan Stanley’s Morgan Stanley Real Estate Fund VII Global. In Australia, CIC helped embattled Sydney-based logistics firm Goodman Group by pumping $500 million into the firm. CIC though isn’t just a recapitalisation white knight. The sovereign wealth fund also closed a 40 percent stake in Hong Kong-based fund manager CITIC Capital. The CIC love reached Europe too, when it was one of the participants in the recapitalisation of Morgan Stanley-controlled Songbird Estates, which owns Canary Wharf Group in London. CIC’s strategy is certainly global in scope, with the fund reportedly one of the seven investors in Toronto-based Brookfield Asset Management’s $5 billion turnaround club. Brookfield has never confirmed this, but there is likely more joy to come from the $200 billion wealth fund. CIC met with BlackRock, Invesco and Lone Star Funds in 2009, according to the Wall Street Journal, as it looks to put more reserves to work in US property. The intent is clear. In a year when investors were often sitting on their hands, CIC got up and danced.
GLOBAL BROKER OF THE YEAR
1. NAI GLOBAL
2. Richard Ellis
3. Jones Lang LaSalle
NAI Global president and chief executive officer, Jeff Finn, believes his firm has found its place among private equity real estate firms and judging by this year’s awards victory the sector clearly agrees. “Everyone was active in the private equity real estate space at that time,” he admits, “but we have been able to leverage off that during the down cycle to take advantage of opportunities last year when the market was frozen.” Sure, total investment mandates were down from the firm’s traditional $15 billion a year average (purchases and sales) but only by approximately 15 percent to 20 percent. Typical of an NAI-advised transaction in 2009, Finn recalls brokering a $150 million loan portfolio sale to a private equity firm by a large US national bank. “We are now working with that firm to help them maximise value from the portfolio,” boasts Finn. NAI, which has an 800-professional strong investment team across its network of 325 offices in 55 countries, counts Cerberus Capital Management and Lubert-Adler Real Estate among its clients. Given how its ambition to place itself within the private equity real estate space seems to have paid off with this award, expect that client list to grow.
MIDDLE EAST, NORTH AFRICA FIRM OF THE YEAR
1. GLOBAL INVESTMENT HOUSE
2. Abraaj Capital
3. PetroSaudi International
In a year in which the Middle East was tarnished by Dubai’s runaway debt problem, Global Investment House (GIH) was pleased to pay dividends to investors in its property fund, Global MENA Ijarah Real Estate. The Kuwaiti-based group managed to make cash distributions of 6.5 percent in August, the third quarter of dividends in a row from the pan-Middle East vehicle. This was no small feat. As GIH said last year, the economic situation worsened during the first half of 2009 as continued recession and lack of economic activity took hold. A number of projects were delayed, cancelled or scaled down reflecting lack of bank credit and inadequate liquidity in the system. But GIH reported that a scarcity of funds in the region had led to positive gains. The fund called 40 percent of its committed capital in 2008, which it invested in two projects in Dubai and its own back yard of Kuwait. GIH as a corporate entity has not emerged unscathed from the downturn, however. In January this year, it announced a plan to split its business in two, creating a real estate holding company and a Global Macro Fund as part of a debt restructuring.
LATIN AMERICA FIRM OF THE YEAR
1. VISION BRAZIL INVESTMENTS, REAL ESTATE
2. Brookfield Asset Management
3. GoldenTree InSite Partners
2009 was not a great year for fundraising, however a handful of private equity real estate firms did succeed in closing vehicles, including Vision Brazil Investments. The Sao Paulo-based firm raised $210 million for its Ken Wainer