US NEWS: Coming to America

For the past 25 years, European Investors has specialised in garnering offshore capital to invest in US opportunities through joint ventures with local operators. Now, the New York-based investment firm, which also has offices in Singapore, Munich and Amsterdam, is trying its hand at courting American investors with its investment model.

Later this year, European Investors will launch a new initiative whereby it is looking to form joint ventures with US REITs and private equity real estate companies to invest primarily in the US multifamily sector, with an emphasis on the Mid-Atlantic region. The firm is hoping to raise up to $200 million in equity from US pension funds and other institutions for such investments.

Founded in 1983 by chief executive Christian Lange and managing director Richard Adler, both former Goldman Sachs executives, European Investors originally was set up as a European family office advisor exclusively focused on investing foreign capital in the US across asset classes. In 1987, the firm developed a portfolio management service specifically for securitized real estate, and it began managing real estate securities portfolios for US institutions in 1993. The firm expanded its team and product offerings to include European and Asian real estate securities management in 2000.

According to Stuart Mackintosh, managing director of direct real estate at European Investors, one of the reasons for the expansion is quite simple: “To diversify our client base and sources of capital.” He added that the sector the firm is looking to focus on – Class B multifamily – is an area in which not many European investors are eager to put their money.

“Given the financial crisis, European capital has gotten very sticky,” said Mackintosh. “Some of the opportunities in the US will not be attractive to offshore capital.” Class B multifamily is “more of a value-added strategy” than offshore investors are interested in right now, he noted.

European Investors is not looking to raise capital through a traditional fundraising campaign, rather it is looking to match investors with local operators needing capital for a particular investment. “We’re not out there with a prospectus or fund document,” said Mackintosh. “It’s a value-added multifamily investment strategy targeting one investor or a handful of investors.” In fact, the firm already has lined up one operator that could form a potential joint venture.

For the joint ventures European Investors structures on behalf of its offshore investors, the equity split can range from 90 percent investor and 10 percent operator to an even 50 percent each, depending on the operator’s access to capital. Equity splits are expected to be the same in the US and also will depend on the operator’s access to capital.

Although the initiative is in the very early stages – the goal really is to get the initiative started this year – European Investors is facing a couple of big challenges. The first one is obvious – attracting that first major investor. The second is simply being the new kid on the block in this market.

“US groups know us mostly from our role as a portfolio manager of real estate securities, so we’re not very well known on our direct side,” Mackintosh said. The firm’s track record with offshore investors, however, should help it inspire confidence with potential American investors, he noted.