There comes a moment in a career when leaders of a large real estate platform want to recapture some of the entrepreneurial spirit that marked their earlier years. Eric Sasson and Robert Hodges, who left The Carlyle Group this summer after 12 years with the firm, that moment has arrived. Along with a third partner – Oussama Daher, who also worked at Carlyle and before that LaSalle Investment Management – the pair has launched their own investment firm, called RedTree Capital.
Speaking with PERE in their first interview since spinning out, Hodges and Sasson noted that they officially launched RedTree in September, and the partners have been speaking with investors as well as looking at deals since then. “We have all reached the stage in our careers where we have worked at big institutional-type firms that have transformed during the time we were there,” commented Hodges. “We wanted to go back and find that entrepreneurial kick again. It is the idea of starting something up, building a team, going out and getting closer to doing the deals.”
It is obvious that Carlyle has changed a lot since the trio first starting working there. For one thing, the Washington DC-based firm has roughly 10 times the amount of assets under management nowadays compared to when they joined. Sasson joined from LaSalle in 2001 as fund head responsible for establishing the European real estate platform and, together with Hodges and his colleagues, went on to invest more than €4 billion of equity in more than 100 deals across 11 countries. Hodges also joined from LaSalle in 2001 as one of the founding directors of the real estate team and took charge of asset management in Europe as well as UK transactions. Daher, the third member of the RedTree team, joined the same year from LaSalle and served as chief financial officer.
Three funds were raised while the trio were there – the first Carlyle Europe Real Estate Partners fund and the third were very successful, but the second of a 2006 vintage was less so. Despite that second fund disappointment, Sasson said talking to investors hasn’t been difficult at RedTree. “We are transparent about it because it is what it is,” he remarked of the second fund.
Hodges noted that the trio have been talking mainly with US investors that they already know and who know them from their Carlyle days. “You get into a position where investors we are talking to know us,” he said. “We are not trying to convince people who don’t know us to invest with us. We placed €4 billion worth of equity in deals at Carlyle, and what we are trying to do is to carry on our activity since 2009.”
In terms of strategy, RedTree is looking at mid-sized office, residential, student and youth accommodation, land assembly and zoning, plus hotel investments. The bulk of its deals are expected to take place in the UK, France and Germany.
The pair explained that, if all goes according to plan, RedTree will have a core team of around 20 people. The UK and France will be covered directly by local teams, while other European markets such as Germany, Italy and Spain will be covered by exclusive operating partners.
RedTree doesn’t feel it needs to explain the market opportunity as such. Instead, Hodges and Sasson reported that conversations, particularly with North American investors such as public pension plans, were more about “timing.” As Hodges said, investors already see the “really attractive opportunity” in Europe. “The most time we spend is not on what the opportunity is or the scale of it but the timing. It is about why we think now is an interesting time in the cycle to come in.”
The new firm is looking to exploit the debt-led crisis, of course, with forced sale opportunities from struggling public and corporate institutions, as well as the deleveraging process taking hold and the supply/demand imbalance for specifically targeted asset classes. Asked about raising a vehicle, Hodges and Sasson declined to comment. However, reading between the lines, a fund of some sort seems to be in the pipeline.
The pair see clear differences of attitude between US investors and European ones that remind Sasson of the mid-1990s, when the team raised a $100 million fund for LaSalle to invest in Paris offices. He recalls how French investors at the time thought they were “crazy” but, within one or two years, they entered the market as well.
“I think what we enjoyed at LaSalle and then Carlyle was starting something up and doing deals,” said Sasson. That is clearly what he and Hodges intend to enjoy again now.