When PERE arrived at ING Real Estate's headquarters in the Netherlands last month to speak to David Blight, senior executives were keeping a closely guarded secret. Blight, chairman and chief executive of the group's €72 billion ($111.6 billion) global investment management business had resigned. After three and a half years in the job, Blight and his family were planning to head back home to Sydney. His resignation, to take effect at the end of August, came as a big shock to colleagues. Not only does ING Real Estate now have to find a replacement, it also has to complete a revolution without one of its chief architects. In one way though, Blight's timing is not all bad news for the firm, based in The Hague. Having implemented a series of initiatives – such as the creation of a global board of investment management – the business now has a structure in place to manage its global footprint. Not only that, but the fundamental pillars for a global opportunity platform – a first for the group – are in place. This year, ING will hit the road to raise a target of $1.5 billion for the business.
ING Real Estate Investment Management is a company that seems too big not to have a global opportunity platform. It manages 71 funds, employs 1,400 people in 21 countries and has 470 clients. But the glaring omission in its arsenal is having vehicles that can deliver 20 percent-plus returns. Of its 71 funds, the closest it gets to rock star returns is with a few value-added vehicles and a China focused opportunity fund.
ING Real Estate Investment Management
|Headquarters||The Hague, Netherlands|
|Assets under management||€72 billion ($111.6 billion)|
|Employees||1,400 in 21 countries|
|Capital raised||€11.4 billion ($17.8 billion) with total aquisitions of €11.1 billion ($17.3 billion)|
One of the key issues ING overcame though, according to Blight, was pinpointing the team who could find deals promising opportunistic returns. As a core and core-plus investor, ING has a legion of investment professionals, and, rather than going on a hiring spree, the group is using its current crop of managers to access potential transactions. That decision though has also introduced a whole new question for ING – the issue of incentivization. In response, ING has introduced a new compensation structure to reward staff for helping locate deals. Blight says it has been no small task.
“This has been quite a revolution for us as a group,” he says. “We have had to embrace compensation schemes that have been quite foreign to this organisation.” ING Real Estate's whole compensation scheme has now been revamped as the parent bank makes similar moves in its other business areas, but it's not been easy. ING cannot simply switch to a real estate opportunity fund structure because it would cost too much. In addition, investors in the core and core-plus funds would need reassurance that staff are still trying to find deals that beat their respective benchmark performance targets. It means the group has had to be careful making the transition. “We have to give our people the upside that if they deliver superior returns for investors, they can share in it, but without compromising the integrity of the bigger business,” says Blight.
One of the upsides to the strategy is that previously unknown talent is surfacing from within the ranks. These are the future leaders of ING. “If the plan pans out, successes will come from within,” says Blight.
And for ING, people are key to growing the business. Each year, senior managers sit down to devote two days to analyzing the group's top five percent of performers. The sheets of paper complete with photos and deal analysis are discussed at length to work out how best to deploy and develop the talent. That process will become more interesting now investment managers have the mandate to locate opportunistic deals. Already, challenging investment professionals to find deals capable of opportunistic-style returns is having an interesting effect. Talent is rising to the top. Blight says: “It has been a pleasant surprise. Some who we thought might rise to the challenge haven't, whereas some we thought wouldn't rise to it, have. Every day the culture changes just a little more positively.” But motivating human capital is one thing. Attracting and deploying financial capital is another.
DAVID BLIGHTVice chairman of the management board ING Real Estate andCEO ING Real Estate Investment Management2005Appointed chief executive officer of ING Investment Management1998Managing director of ING Real Estate Investment Management in Australia,1989Joined Armstrong Jones NZ Pty Ltd, a New Zealand investment managementbusiness acquired by ING, in 1996.Previous postsMirvac Ltd, a large Australian based property development and investment group,based in Sydney.The future
Though Blight departs in August, ING will likely still embark on a series of initiatives. In the US, ING plans to drop the “Clarion” from its name. In Europe, the firm is working on a healthcare fund, while in China, the group will launch a second vehicle. In London, it is teaming up with a sovereign wealth fund to buy assets. ING Clarion Capital, the real estate securities business in the US, will also consider a third debt fund, a vehicle which could eventually be introduced to Europe.
And when Blight leaves at the end of August, these are the strands his successor will be picking up. But the bigger job at hand will be continuing to manage the global operation. At a time of growing cross-regional capital flows, how is ING going to respond to maximizing its platform at the time same as serving its clients? That is the €72 billion question. At one extreme, Blight says, the business could be managed as a conglomeration of businesses with no common values, no branding, no binding together. At the other end, it could be a business with just one profit and loss center with everyone reporting to the chief executive.
“The answer is in the middle,” he says. “I didn't want to compromise the regional businesses because it is a local business and you don't want to mess with all of its people reporting into the local chief executive officer. You want that in place. My job has been to bind that together.”
Blight is proud of the job he has done, but he volunteers that more needs to be done. Asked what the mood is like within the business, he says: “Better. Ultimately, the measure of success will be the growth of the business.” That task will be the concern of the new chief executive of ING Real Estate Investment Management, who has yet to be named. For now though the group is firmly concentrating on its opportunity platform. The rock star years have finally arrived.