Last month, ING Group’s chief executive Jan Hommen said: “Real estate is back in the black.” Perhaps that is why it feels doubly poignant at this moment to be saying goodbye to ING Real Estate Investment Management (REIM), which being swallowed – for the most part – by Richard Ellis. (Part of its North American operations is being bought by the management team of Clarion Partners, with backing from Lightyear Capital.) 

Hommen was speaking on 16 February as he presented the Dutch bank and insurance group’s full-year financial results for 2010. They showed overall banking and insurance activities have not only swung back to profit but, at €3.2 billion, have returned to pre-crisis levels. Things certainly are a whole lot better than they were in 2009, when the group recorded a loss of €935 million.

In his presentation, Hommen ran through the salient points about forthcoming IPOs of its insurance units and progress on paying back more of the €10 billion bailout it received in 2008 from the Dutch government. But he also mentioned how real estate had swung back into the black in the fourth quarter, thanks to no further devaluations of its holdings and the stabilisation of global real estate markets.

The world has become anesthetised to how huge businesses have had to shed certain real estate units, even if fundamentally sound and well managed, because of the turmoil of the past 36 months. Yet somehow that doesn’t numb the pang of regret at their demise. On the contrary, when one hears things like the real estate markets have stabilised, it becomes legitimate to mull over whether selling these units is the best course of action – whether at the behest of a parent company, a national government or an even larger body such as the European Commission.
One could say that ING only has itself to blame for expanding too much into real estate and using capital from its insurance group and the bank to help it do so. It is certainly paying a price for that now.

In the release about the sale of REIM one day before its full-year results were made public, Hommen said the transaction came as ING pursued its strategic objectives of reducing exposure to real estate, simplifying its company and further strengthening its capital base. Yet, it has never said it absolutely had to divest the business. Indeed, to the outside world, it continued to say it was assessing the strategic options for the unit – right up until agreement with CBRE was struck.

Yet, in selling most of REIM in one fell swoop, ING has reversed 15 years of growth at the business. REIM started out in 1995 in the wake of the merger between insurance firm Nationale-Nederlanden and NMB Postbank Group, which left the new ING Group with a ready-made €5 billion property portfolio in the Netherlands. There was nothing then to suggest REIM would become one of the largest – if not THE largest – property investment management businesses in the world, but it managed this feat via a series of mergers, acquisitions, privatisations, portfolio deals and large single-asset purchases. At its height in 2008, just before Lehman Brothers collapsed, it had €72 billion of real estate, employed 1,400 people in 21 countries and had raised €11.4 billion of capital.

In 2008, the only gap in REIM’s offering to LPs was an opportunity fund platform, and it was on the way to filling that hole when the world changed. It had put the key people in place in Europe, North America and Asia and was in marketing mode. With due apology to Marlon Brando’s character in “On the Waterfront,” ING REIM coulda been a contender in the opportunistic real estate industry.

Instead, the net result of 15 years of growth is that ING REIM will give ING Group €500 million to help it concentrate on being a bank. REIM has been forced to take the strategic equivalent of a dive in the third round, enabling Los Angeles-based CBRE Investors to become world champion. CBRE Investors, with its existing higher-return funds, has been able to leapfrog everybody else in terms of size by buying ING REIM with its dozens of core and core-plus offerings. One could forgive the present-day architects of ING REIM for quoting Brando: “He gets the title shot…and what do I get? A one-way ticket to Palooka-ville!”

One also could forgive some at ING REIM for saying to those at the top of ING Group: “You shoulda looked out for me a little bit. You shoulda taken care of me just a little bit, so I wouldn’t have to take them dives for the short-end money.”