FEATURE: Land of the giants

This is the first photo of Matt Khourie and Pieter Hendrikse together since the mega-merger between CBRE Investors and ING Real Estate Investment Management (REIM) was announced in mid-February. Khourie, currently chief executive officer of Los Angeles-based CBRE Investors, will become global CEO of the new $96 billion business, while Hendrikse, currently CEO of ING REIM Europe, will be CEO of the Europe, Africa and the Middle East region.

In London last month to further the integration, Khourie mentioned other senior positions that have been worked out so far. They include: Richard Price, currently head of ING REIM Asia, who becomes head of the Asia-Pacific region; Ritson Ferguson, currently CEO of ING Clarion Real Estate Securities, who becomes global head of the enlarged securities business; Mike McMenomy, who retains his title as global head of investor services; and Vance Maddox, who will continue to run CBRE Investors Strategic Partners, the firm’s value-added and opportunistic fund series.

The next tier of senior positions has yet to be worked out. “There still are some open slots available and great internal candidates,” Khourie said. “Between now, the closing of the merger and probably another three months after closing, we are going to fill out the rest of the organisational chart.”

The corporate headquarters will remain in Los Angeles, while the European headquarters of the new business will be located in The Hague, Netherlands, where ING REIM currently is based. Branding of existing ING funds and other details have yet to be resolved, but it is clear that future funds will not bear the ING name.

Explaining the urge to merge

In discussing the merger itself, Khourie said the deal was about growth, diversification and being “best-in-class.”
“We believe that combining with ING REIM at this part of the cycle – creating a platform that has the best talent in the industry with the scale and resources to match – will provide great investment opportunities around the world, for every strategy and for almost every geography,” Khourie said. “We are going to be able to prove to investors in the market that we are the best fiducially when it comes to investing money in real estate. Yes, we are going to be large, but being large is not the objective. Being the best is the objective.”

Between now, the closing of the merger and probably another three months after closing, we are going to fill out the rest of the organisational chart.

Matt Khourie

Hendrikse, speaking alongside Khourie, told of the immediate relief within ING REIM following the announcement that CBRE Investors would take over the platform.

“The staff reaction following the announcement was first of all relief that we have certainty, clarity and we are going to focus on real estate again,” Hendrikse said. “We all want to work for a real estate company, we came to work for a real estate company and we are going to increase our focus on real estate. We can now present to investors that we are going to be the best in class again. We have had some volatile situations, but we are very excited that we are going to be together with CBRE.”

Hendrikse noted that, over the past year, REIM staff had helped in determining where they wanted to end up. “They have all contributed to the process of working out where our best haven was and what our future was,” he said. “The future was not with ING – that message we got ourselves from ING – but we wanted to seize hold of the opportunity with our own hands. My 12 colleagues in Europe – my leadership team – helped me in defining what the best outcome should be.”

Khourie said CBRE Investors had been looking at the opportunity to combine with ING REIM for a year, since it became clear the platform was up for sale. He noted that the businesses fit together very nicely in terms of geography, strategy and investor base, given there is just a 4 percent overlap between CBRE Investors’ and ING REIM’s investors list of 200 and 400, respectively.

However, according to Khourie, the number one reason for combining was the quality of ING REIM’s professionals. “By having them in our group, we think we can maximise returns for our investors over time,” he said. “It is all about the people.”

Investor alignment

As part of the integration, CBRE has committed to invest $100 million through co-investment positions in ING REIM funds, although much of those details have yet to be determined. “That $100 million will be aimed at creating the appropriate alignment, the detail of which we will work out privately with our investors during the six months until we close,” Khourie said. “We are committed to co-investing right from the start with the existing ING real estate portfolio. We also have committed to both the management team and our board that we are going to continue to invest in new funds and new programmes because we are a big believer in co-investment. That is critically important.”

The future was not with ING – that message we got ourselves from ING – but we wanted to seize hold of the opportunity with our own hands.

Pieter Hendrikse

Indeed, the same week as terms of the $940 million takeover were publicised, Khourie and Hendrikse held investor meetings throughout Europe. “Alignment was one of the first questions asked,” said Khourie, who assured investors that CBRE Investors has additional capital earmarked for future co-investment.
Further meetings with investors will take place as the integration process continues. “What we need to do is to show investors we have done our homework for them,” Hendrikse said. “They have given us a ticket to invest, so we are going to help them in going through this period and making clear that they indeed have a role to play. Every fund has a different time line and different strategy, but we are going to make clear to every investor what their position is, what their responsibility is and what their future can be in that strategy.”

And so far, investors have been receptive. “The response from the investor community has been extremely positive,” Khourie added. “Pieter and I have been getting messages and emails from our major investors, and they are delighted about this acquisition.”

Lightyear buzz
In a bit of a surprise, New York private equity firm Lightyear Capital backs the management-led buyout of ING Clarion

ING Clarion, the US private equity real estate firm and notable part of ING Real Estate Investment Management (REIM) that is not being acquired by Richard Ellis, is going independent. In conjunction with the announcement of the merger between CBRE and ING REIM, it was revealed that New York-based private equity firm Lightyear Capital was backing ING Clarion’s senior management – led by chief executive and chairman Stephen Furnary – in its buyout.

The involvement of Lightyear should not come as a complete surprise. Last year, the financial services-focused firm bought three quarters of ING Advisors Network, the US independent retail broker-dealer business, from ING Group.

Speaking of the acquisition process, Furnary said the senior management team at ING Clarion had the opportunity to be part of the CBRE deal, but he stressed there were too many overlaps with CBRE Investors’ business in the US.

“We know CBRE very well, and they are tremendous service providers,” Furnary said. “We simply thought it better and more attractive to lead a management buyout in partnership with another firm. We thought that would be better for our clients.”

The newly established entity will be called Clarion Partners, Furnary noted, adding that he doesn’t anticipate any change to existing management contracts as a result of the buyout. Furthermore, to kick off the new entity properly, it is launching a new open-ended property vehicle for retail investors, he said, adding that ING would be distributing it.

Clarion was purchased by ING Real Estate in 1998, but the firm was founded in 1982 as Jones Lang Wootton Realty Advisors.