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EUROPE NEWS: JER’s last waltz

It was 1999 when a company long schooled in the art of managing troubled US property loans took the plunge and raised its first European opportunity fund. JER Partners, based in Virginia, managed to corral €128 million in equity commitments for that first effort, called JER Europe Fund I. Twelve years since that European entrée, however, and the firm’s future in the region is very much up in the air.

For at least four months, JER Partners has been in talks with fellow US firm LaSalle Investment Management about a transfer of JER Europe to give investors what they have calling for – a more stable home for the European team managing the assets.

JER Partners has been challenged to deal with JER Europe by limited partners in JER Europe Fund III, the largest of its European vehicles, which raised €809 million in commitments in 2007. That fund went on to make 17 investments in assets valued at €1.9 billion, including co-investments. Poor performance of that fund – although it is said to have stabilised of late – has led JER Partners to refocus activities in its home market of the US. Meanwhile, many on the JER Europe team have left for other firms or to set up on their own.

The two largest investors in JER Europe III are the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, which have been rationalising their roster of GPs in recent times as they try to recover from bad performances by a number of opportunistic fund investments. It is said that these US gorillas sit on a JER Partners committee that has been deliberating over the future of JER Europe.

JER Partners began talks with LaSalle around April, according to sources. However, the lack of an announcement on transferring the remaining asset management team led by Chester Barnes has baffled senior professionals in European private equity real estate circles. According to those that know the firm, another JER Europe professional may have handed in their notice over the summer. The question being asked is: “What is there left to buy, other than the fee income from management?”

With September now here and still no sign of an agreement with LaSalle, some are beginning to wonder out loud if there wasn’t a glitch in talks. JER Partners steadfastly has declined to comment on the matter, and LaSalle said it never comments on market speculation and rumour.

That said, it has become increasingly clear that JER Partners has decided to concentrate on its core US market, and that Europe is no longer a part of any growth plans. If LPs continue to agitate for a solution, one imagines that something needs to happen, and soon.