In roughly three months time, ING Clarion Partners will no longer exist. Instead, in its place, Clarion Partners will emerge as a distinct private equity real estate group with $22 billion in assets under management.
Many will argue, of course, that little has changed in the wake of ING Real Estate Investment Management’s agreement to sell its Americas real estate investment management group to the Clarion management team and private equity firm Lightyear Capital. Indeed, with the same management team, funds and strategy, Clarion investors are unlikely to experience any turbulence from the management buyout and exit of ING REIM.
Clarion chief executive officer Stephen Furnary would agree. “We are going to do what we’ve done every year for the past 29 years and that is to look at the regions and property types in which we invest and identify the arbitrage,” he said.
Continuity, though, doesn’t exclude change, and Clarion already is eyeing a number of new ventures as it looks to grow its platform post-ING. One of the first changes, approved by Clarion management during the sale process but before any outcomes were known, is the launch of a non-listed private REIT to target retail rather than institutional investors. The open-ended vehicle, which represents Clarion’s debut into the retail distribution world, will focus on core-type assets generating higher incomes as opposed to the higher total returns favoured by institutional investors.
“We think of this product for the mass affluent market as an additional institutional client or another private fund, but with a new network to access capital,” said Stephen Cordes, Clarion’s head of portfolio management.
The deal also mirrors Lightyear’s ambition to expand the Clarion corporate franchise beyond the institutional investment community. Don Marron, the chairman and founder of the New York-based firm, said: “People are taking their futures into their own hands when it comes to their retirement, which will equate into a big demand in the long-term for conservative yield products. Commercial real estate is an ideal fit for that.”
For Clarion, the REIT also will retain its link to ING, with ING Investment Distributors set to distribute the vehicle. However, the coming years won’t just be about Clarion’s retail expansion, they also will be about the firm’s institutional separate accounts and closed- and open-ended funds as Clarion looks to increase its assets under management by an estimated $2 billion this year.
Cordes said Clarion already was seeing a new wave of capital entering the firm’s open-ended core and value-added funds, which could translate into queues being formed within the next two quarters in some cases. The firm also just closed a “significant” separate account targeting Brazil’s industrial sector, according to Furnary, who said Clarion would look to expand in Brazil and into other Latin American countries, with possible funds launched in the future.
The Clarion management buyout, which saw Lightyear take a majority interest and ING keep its GP co-investment in the firm’s private funds, is expected to close in the next three months following LP approval.
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