EUROPE NEWS: Creative destruction

The disentanglement of Bank of America Merrill Lynch’s private equity real estate management business continued last month as the European team finally completed a management buyout.

Roger Barris and fellow team members Stefan Aumann, Boris Schran and Mark Fenchelle have acquired Bank of America’s GP interest in two funds – Merrill Lynch European Real Estate Opportunity Fund and Bosphorus Real Estate Fund I, which have €261 million and €204 million of commitments respectively.

The spinout firm, Peakside Capital, will also continue managing a separate portfolio of assets owned by affiliates of Bank of American Merrill Lynch in Europe. In addition to the senior managers, Peakside has taken on 13 former members of Bank of America Merrill Lynch (BoAML) and plans to hire an additional four people.

The deal is a fundamentally different to how the fate of  BoAML’s Asia platform has played out. Over the summer, the bank decided not to sell the Asia platform, but instead struck an agreement with The Blackstone Group for it to become the asset manager, with Bank of America staff transferring to Blackstone as part of the agreement.

Yet the fate of the European business does have a key similarity with the Asia platform in that Bank of America has decided to remain as an LP in the funds.

Barris and team have been speaking with the parent group for months about an MBO after the bank decided its private equity real estate management business was no longer a core activity. 

Now the task immediately at hand is the continued asset management of the two funds. The Bosphorus Real Estate Fund I is dedicated to Turkish real estate with a focus on retail, residential and mixed-use developments. According to its development and investment manager partner, Istanbul-based KREA Group that was set up in July 2006, the fund signed agreements for six projects in Turkey, representing an investment of $ 1 billion.     

Barris became managing director and EMEA head of real estate private equity at Merrill Lynch in May 2005. He previously worked at Barry Sternlicht’s Starwood Capital as partner in charge of Europe, and at Deutsche Bank where he was responsible for the European activities of the real estate opportunities group. 
Peakside said it intends to raise discretionary funds, but also plans to take non-discretionary investment mandates from investors.