Accompanying PERE’s first special report on debt funds is our inaugural top 50 ranking of global private real estate debt fund managers – RED 50 for short.
Compiled by our colleagues in the PERE research & analytics team, the list is based on the capital raised for debt issuance funds between 2014 and 2018. And a familiar name occupies the number one spot – Blackstone. North American-based managers, in fact, dominate the ranking – 32 feature in total, likely a reflection of the maturity of the market stateside compared to other regions.
European managers take up 16 places in RED 50 with London-headquartered ICG-Longbow the region’s top dog in third place followed by M&G Investments in fourth and DRC Capital falling just outside the top 10 in eleventh position. Asia-Pacific-based fund managers fare less well, with just two managers – Melbourne-headquartered Qualitas and Japan’s Diamond Realty Management – in RED 50.
Now, we round out our countdown with the top 10…
LaSalle Investment Management
LaSalle Investment Management has been investing in real estate debt and equity in the UK and Germany since 2009 through its close-end LaSalle Real Estate Debt & Special Situations Fund Series. Amy Aznar heads LaSalle’s European Debt & Special Situations Group.
In late 2018, it significantly expanded its business by acquiring a $1.2 billion majority stake in the commercial real estate debt fund business of Latitude Management Real Estate Investors, broadening LaSalle’s focus to the US real estate financing sector. Renamed LaSalle Mortgage Real Estate Investors, the group provides short-term, floating rate loans to mid-market commercial real estate sponsors, with a primary focus on the origination of new bridge loans for value-add and transitional properties in sustainable growth markets throughout the US.
Based in Los Angeles with an office in Denver, it is currently investing out of its most recent fund, Latitude Management Real Estate Capital IV, which has about $480 million in commitments. The team, which counts 18 employees, is headed by Glenn Sonnenberg, president and CEO.
Oaktree Capital Management
Although Oaktree’s real estate team had actively invested in debt in its first 15 years, in 2010 the firm added real estate debt as a standalone strategy to invest capital in performing real estate debt on a global basis. Today the team focuses on a broad range of transactions in the commercial and residential sectors, investing in both private loans and traded securities.
The firm closed Oaktree Real Estate Debt Fund II, its follow-up commercial real estate debt investment fund, in 2018 on more than $2 billion. Its predecessor, Oaktree Real Estate Debt Fund, had a 14.7 percent net internal rate of return as of December, according to the firm’s earnings results.
The strategy is led by John Brady, a managing director and head of the global real estate group, and Justin Guichard, a managing director and co-portfolio manager for Oaktree’s real estate debt and structured credit strategies. Oaktree’s real estate debt strategy has $3.2 billion in AUM as of December 31 and offices in Los Angeles, New York, London, Hong Kong, Seoul, Sydney and Tokyo.
Pacific Coast Capital Partners
With offices in New York, San Francisco, Los Angeles and Atlanta, Pacific Coast Capital Partners, which recently celebrated its 20th anniversary, has raised, invested and managed more than $19 billion in 850 transactions since inception. It has $9 billion in commercial real estate debt and equity assets under management.
PCCP originates senior and mezzanine loans secured by commercial real estate, often loans to lease-up and stabilize assets, loans on properties that are being repositioned, construction loans, loans on vacant buildings, and loans for discounted payoffs and discounted note acquisitions. The firm typically invests between $20 million and $300 million across properties in the US, including office, industrial, multi-family, retail, hospitality, residential and land. In December 2018, it closed a $162.5 million five-year loan on a Class A office project in Beverly Hills to Divco West.
PCCP has more than 95 employees and is led by founders Aaron Giovara, Donald Kuemmeler and Bill Lindsay. It sold a 24.9 percent stake to Sydney-based money manager AMP Capital in December 2017, while the California State Teachers Retirement System is also a major shareholder.
PGIM Real Estate
PGIM’s real estate businesses originated a record $18.1 billion in loans in 2018 and, in the US, provided more than $500 million in financing on behalf of institutional investors, including preferred equity, core-plus and mezzanine debt. In one of its most recent transactions, it originated $88.5 million to Madison Capital and Lubert-Adler Partners to refinance 71 Fifth Avenue, an office-and-retail building in Manhattan’s Flatiron District.
In Europe, the business provided more than $400 million in financing across 12 transactions on behalf of institutional investors, primarily in the UK. Transactions included whole and junior loans, and mezzanine and preferred equity positions in development and existing assets. Sectors included traditional residential, student housing, office, retail, industrial, mixed-use schemes and hotels. In Asia, the firm recently hired an executive director to lead real estate debt operations in Australia.
The real estate businesses of PGIM are led by Eric Adler, chairman of PGIM Real Estate and PGIM Real Estate Finance. The global debt real estate business is led by David Durning, president and CEO of PGIM Real Estate Finance.
Brookfield Asset Management
The Brookfield Real Estate Finance Investment team is led by Andrea Balkan and Chris Reilly, both managing partners based in the firm’s New York office.
In late 2017, Brookfield Asset Management closed its latest fund, Brookfield Real Estate Finance Fund V, with about $3 billion. Its fifth commercial real estate finance vehicle targets mezzanine debt investments through the origination of financing for high-quality properties in major markets across the US. Brookfield committed $400 million to the fund, joining more than 60 institutional investors, including public and private pension plans, sovereign wealth funds, financial institutions, endowments, foundations and family offices. Its first vehicle closed in 2004.
Brookfield’s strategy typically consists of originating whole loans, syndicating senior loans to third parties and retaining a large tranche of the mezzanine loan.
In 2017, it arranged a $375 million financing package for 70 Pine Street, an office-to-residential/hotel conversion in Manhattan’s Financial District. Brookfield also manages separate accounts focused on senior mezzanine investments.
M&G Investments’ real estate debt finance team has invested more than £8.5 billion ($11.3 billion; €10 billion) across the UK and Europe since 2009, with a primary focus on creating value by originating whole loans secured against strong underlying properties, which it holds to maturity.
It invests across the capital structure through senior, mezzanine and whole loan strategies, and offers both commingled and separate account products. It recently provided a £125 million development financing facility to Urbanest, a developer and operator of student accommodation, for a project in the City of London.
In 2017, it launched three vehicles, M&G Real Estate Debt Finance IV, V and VI, which are being raised simultaneously to invest across the capital structure. Since these strategies launched, the team has raised over £1.5 billion for the platform. All three vehicles focus on European real estate debt, investing across the capital structure.
The real estate debt finance team, headed by John Barakat, who founded the business in 2008, counts more than 20 professionals.
AllianceBernstein’s commercial real estate debt group, AB CRED, was formed in 2012 by its current chief investment officer Roger Cozzi to provide loans to large institutional owners and operators of commercial real estate. AB CRED focuses on first mortgage loans secured by transitional properties that demonstrate potential for value creation through lease-up, asset renovation, asset repositioning or market recovery.
AB CRED’s most recent fund closed in June 2018 and totaled $3.1 billion in commitments from institutional investors worldwide, a significant increase in size compared with the two previous funds. Its first fund closed on $750 million in commitments in 2013, while the second closed in 2015 with commitments in excess of $1.5 billion. AB CRED has invested more than $5 billion since 2013 with loans ranging in size from $20 million to $250 million, encompassing all major commercial property types. All loans are held on balance sheet through maturity and the funds do not use leverage.
In January 2019, AllianceBernstein also finalized a joint venture with its real estate private equity group, now known as Prospect Ridge, led by Brahm Cramer and Jay Nydick.
London-based Intermediate Capital Group’s real estate investment solutions are provided and managed by its real estate division, ICG-Longbow.
ICG-Longbow’s real estate team mainly invests in self-originated whole loans secured against commercial property in the UK. They also provide development funding and subordinated capital, including mezzanine debt and preferred equity. The firm also has a UK real estate senior debt program.
ICG-Longbow Senior Secured UK Property Debt Investments, a closed-end listed investment company on the London Stock Exchange, focuses on building a portfolio of UK real estate debt-related investments mainly comprising loans secured by first ranking fixed charges against commercial property investments.
As of October 2018, the portfolio had nine loan investments for an aggregate value of £105.5 million ($138.9 million; €122.6 million), mainly on properties located in London and throughout the rest of the UK. One of its most recent transactions was a £16.2 million financing secured by a multi-let office building in Bristol.
ICG-Longbow has £3.6 billion in assets under management as of September 30, 2018.
Goldman Sachs Merchant Banking Division
Focused on both Europe and North America, the real estate group of Goldman Sachs’ Merchant Banking Division has raised approximately $15 billion of commitments for real estate credit since 2008.
Most recently, it held a final close for its latest real estate credit investment vehicle, Broad Street Real Estate Credit Partners III, in January 2018, raising $4.3 billion, which includes a $2.5 billion commitment from Goldman’s balance sheet. Including leverage, the fund has $6.7 billion in total capital available to invest. It also recently closed on its first senior loan in Europe, a $240 million for the development of a high-end senior living facility in London.
The real estate group is headed by Alan Kava, the New York-based co-head of MBD’s Real Estate Group, and Jim Garman, its London-based co-head, while Peter Weidman acts as MBD’s global head of real estate credit.
Goldman Sachs focuses on direct originations of both senior and mezzanine loans secured by high-quality assets in major markets in the US and in Europe. It can provide loans of $100 million to more than $500 million.
Part of Blackstone’s Real Estate Group, Blackstone Real Estate Debt Strategies, or BREDS, launched more than a decade ago. Most recently, it closed BREDS III in summer 2016 on $4.5 billion, ahead of its $4 billion target. The fund has focused mostly on mezzanine and structured lending on well-located, institutional-quality real estate. It has returned an 18 percent net internal rate of return as of March 31, 2018, according to Pennsylvania Public School Employees’ Retirement System.
The team of 114 professionals is led by Michael Nash, senior managing director and co-founder of the group and chairman; Jonathan Pollack, senior managing director and global head of the group; and Tim Johnson, senior managing editor and global head of originations for BREDS. Blackstone’s real estate debt funds typically target investments with current cashflow, capital protection and high-quality borrowers. BREDS has also bought legacy commercial real estate exposure from banks. Recently, it originated a $476 million whole loan secured by The Row, a seven-building retail and office campus in Los Angeles. The unit has $17 billion in AUM as of December 31, 2018.