News last month that London-based Invista Real Estate Investment Management would be broken up topped a frenetic period of corporate announcements pointing towards a changing private equity real estate landscape in Europe.
Invista had been on the sharp end of a decision by majority owner Lloyds Banking Group to transfer management of several key funds to subsidiary Scottish Widows, which the bank has owned since 1999. Painfully aware that it would lose £5.3 million (€6 million; $8.3 million) of fee income out of its total revenues of £13.7 million, Invista management led by chief executive Duncan Owen decided to throw in the towel.
In an announcement on 12 October, the company said that, without that £5.3 million in revenue, the interests of clients and shareholders of Invista would be best served by an “orderly realisation of value” from Invista's assets, including the asset management business. In short, assets could be liquidated or perhaps the whole platform could be sold to a willing buyer. Potential suitors of Invista would be eyeing a platform that manages £5.4 billion of assets as of 30 June this year.
The announcement was big news in European property fund management, yet just one of a number of strategic decisions announced in the days in and around the annual EXPO REAL property trade show, which took place in Munich from 4 to 6 October. In doing so, companies are slowly showing how the landscape of European real estate fund management is changing.
On day one of the show, one of the mainstays of European private equity real estate, Europa Capital Partners, announced a sale of a majority interest to Rockefeller Group International, the New York-based real estate investment firm, which itself was acquired 11 years ago by Japan's Mitsubishi Estate. Europa has around €2 billion in property under management, so it is smaller than Invista. That said, it is better known in private equity real estate circles because it is a manager of predominantly opportunity funds.
Of the Rockefeller investment, Europa said it would provide scope for developing its business. Indeed, the firm is expanding beyond opportunity funds into core strategies and could use a deep-pocketed friend to help push forward on both fronts.
In fact, Europa just set up a 50/50 joint venture with Frankfurt-based Feldberg Capital to sponsor and manage core property funds for German institutional investors. The linked reason for selling a 75 percent stake to Rockefeller is that Europa is listening to investors who are saying across the board that they want greater co-investment from managers of vehicles. Europa can now draw upon its new friend to provide the co-investment capital that will satisfy its limited partners. For Europa, it seems to be onwards and upwards.
The remaining corporate deals announced around the time of EXPO are different than the Europa situation in that they were not created out of a chance meeting at a conference (as was the case between Europa and Rockefeller) but rather as part of a strategic move initiated by the seller.
The day after the EXPO show, the real estate fund management division of boutique London bank, Close Brothers, was sold to Alpha Real Capital. That platform has £560 million in real estate assets under management. Close Brothers has undergone a root and branch strategic review and has decided to focus on the development of what it calls its “high growth” UK wealth and asset management businesses. Last year, the firm spun out its three private equity businesses.
Furthermore, in the run up to the show, AEW Europe, the Paris-based fund management group, said it was selling its property management subsidiaries in Central Europe (PBW Polska, PBW Hungary and PBW Czech Republic) to France's expanding BNP Paribas Real Estate Property Management. It is keeping its asset management people in that region, nevertheless it is still a strategic move.
All the firms offloading, repositioning, restructuring or recapitalising have their own reasons, of course. But the interesting thing to note is that the market seems steady enough for sellers to have the confidence to publicly announce plans for dispositions and for counterparties to put a value on assets and/or businesses.
That points to more corporate activity to come, rather than less.