This month, the private equity real estate industry has a new hero – or should that be villain? His name is Kweku Adoboli, and he works for UBS in London. That is, he worked for UBS, having recently confessed to causing his employer a $2.3 billion loss in a short span of time buying and selling hedges against various indices and exchange-traded funds.
While a villain to the greater financial community, Adoboli could be seen as something of a hero to the private equity real estate industry in the sense that he has made the worst-performing funds suddenly seem not so bad. After all, it took them a few years to lose large sums of money rather than just a few weeks in front of a computer – and at least there were physical assets from which to seek recourse.
In the end, however, the UBS trader probably has done more harm than good. Risk control – the lack of it or the ease with which some people can circumvent it – has turned up the heat on those considered to be involved in higher-risk investments, including real estate opportunity funds. As Nicholas Donato’s report on the progress of the AIFM directive illustrates, Europe is keen to regulate anything perceived as risky. Check out what it means for private equity and real estate firms, starting on p. 30.
This month, we also are mindful that thousands of real estate professionals will be descending on Munich for the annual Expo Real property show. It is no coincidence, therefore, that you will find four professionals discussing German real estate, more particularly the hidden distress in the market, in our annual Germany roundtable beginning on p. 34.
Indeed, there is strong German flavour to this issue, as we also speak on p. 18 to the former real estate head of Cerberus in Germany, who has just closed a German distressed real estate fund at more than twice its target. By the way, Germany is just about the only place in Europe that Grove International Partners can contemplate investing in right now – which is why we reveal on p. 16 that the firm is downsizing its European operation to favour the US.
Elsewhere, Evelyn Lee explores the growing popularity of debt funds, starting on p. 26, and James Comtois examines on p. 11 how the sale of Archstone could be the last of the large distressed real estate workout deals in the US. So next up, Europe?
We shall wait to see if that becomes the case, as well as who will become the next hero or villain in the world of private real estate.