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The big hitter

In 1999, Ric Lewis established Curzon Global Partners as a boutique European fund for AEW. Now, eight years and €15 billion later, he talks here about the firm's rapid ascension, why he set out to “wreck” European investors, and how a hole-in-one nearly cost him a car. By Robin Marriott

Ric Lewis has come a long way since his days in Maine. Fresh out of Dartmouth College in the 1980s, Lewis was then a young corporate banker struggling to sell lending services to intransigent New England manufacturers.

But fast forward 20 years, and Lewis is not only the chief executive officer of Curzon Global Partners, a London-based private equity real estate firm, he is also the chief investment officer of AEW Europe, a pan-European institutional real estate investment firm and a Curzon affiliat. And recently, Lewis celebrated the close of his firm's fourteenth property fund, which, all told, have raised a cumulative total of more than €4 billion ($5.2 billion) in eight years.

So from his London office, the 44-year-old native of Salem, Massachusetts, can take a few moments out of his busy day to reflect on his early days in the wilds of New England. In his tale, Lewis conveys a vivid image of an eager rookie working for a Boston-based regional bank. Handed the territory of Maine, the most northerly state in the continental United States, he has to travel by helicopter to reach certain manufacturing facilities because they were so remote. Only one other person used the company helicopter, Lewis says, and that was the chairman of the company.

“I would fly to customers, land in this factory that made shoes, jump out of the helicopter as a 6'10” black guy and tell them why they should bank with us when their nearest branch was 250 miles away,” he confides with a wry smile. “I got a lot of nice tea and biscuit conversations but they were like: 'It's never going to go anywhere.'”

Lewis relates this story to answer a question about the difficulties of raising Curzon's maiden fund. In the past, Lewis has been quoted as saying he had to “beg” investors to commit to the fledgling company when it was founded in 1999. But today, he is less dramatic, arguing that the young firm was prepared for the task at hand. At the very least, his personal experiences in the Maine wilderness certainly helped.

Lewis, the son of a fire chief, harbored ambitions of a real estate career after college. But having failed to break into the Boston property scene, he joined the regional bank instead. Three years later, however, a chance conversation led to an unexpected entree into the industry.

While planning to go to Harvard Business School, a bank colleague suggested Lewis meet Peter Aldrich, a Harvard lecturer and the co-founder of AEW Capital Management, a well-known real estate investment firm.

Lewis must have impressed, because after the meeting Aldrich told him: “It sounds like you want to go to business school and get this job two years from now. How about I save you a lot of time and money?”

Lewis joined AEW in 1987. He trained in acquisitions, asset management and restructuring investments before being promoted to director of asset management and president of capital management resources—two titles he held from 1992 to 1996. Though Aldrich delivered on his promise to allow Lewis to go to Harvard—he entered the school's PMD Program, an intensive, three-month executive education course—Aldrich was readying for retirement by the time Lewis graduated. The AEW co-founder had started a joint venture company called AEW International, which was exploring real estate investment in Russia and Italy. He asked Lewis to be its president and chief operating officer. When the parent group decided to expand into new territories, it asked Lewis to be the point man.

Empire building
The strategy AEW deployed was to create a 50/50 joint venture with property services firm DTZ in 1999. This enabled AEW to establish a European platform without teaming up with a competitor or committing too many resources to the effort. AEW named the venture Curzon Global Partners, after the London street where DTZ was based.

“We named it Curzon in case I screwed it up,” says Lewis. “We didn't want to wreck our very successful franchise.”

“In Europe, people leave money on the table for the benefit of relationships and longevity and the next deal. That's a great place to work in.”

As a boutique property fund business for AEW, Curzon decided to pursue a core-plus strategy, avoiding both European core property investors as well as US opportunistic players such as Apollo, Lehman Brothers, Blackstone and Goldman Sachs. “The reason we have been successful is that we picked a space that was unoccupied,” says Lewis. “And we had great timing.”

In 1999, the US capital markets were hungry for tech stocks, but in Europe, the EU was expanding and European real estate investors were looking to diversify outside their domestic markets.

Curzon offered investors what Lewis calls a “baby step” in pan-European logistics and office property markets. It also offered to co-invest and bring levels of transparency and alignment to investors, which were then unusual on the Continent.

“When we were first marketing the firm, our unofficial motto was ‘wrecking the industry one investor at a time’ because we were doing something in Europe where it didn't exist,” says Lewis. “Reporting monthly net asset values, how we derive fees and so on. When we started eight years ago, right from the beginning, the private equity funds were doing co-investment, but the people in core and core-plus were not.

“We said we believe in alignment of interest right down to the individuals. Today that seems like it's common sense, but when we started people used to look at me and ask: 'Your money is going to be with my money?' I didn't re-write the rule book. I took what I learned in the US and brought some of that here.”

Among the first funds that Curzon raised was Curzon Capital Partners I, which closed on €230 million in 2001. The vehicle, which was managed from London, focused on office and logistics properties in France, Spain, Italy and Germany.

But just as Lewis was in the early stages of growing the business, an unexpected catalyst for expansion arrived. The powerful French institution Caisse des Dép^ts (CDC) bought AEW's parent, Nvest, and a year later CDC formed a banking alliance with fellow French banking institution Caisse d'Epargne, the owner of investment bank and asset manager IXIS. The IXIS brand was merged with AEW to create a global property platform. Legendary fund manager Joe Azrack became chairman of IXIS AEW Europe, the European counterpart to AEW US in North America and AEW Asia. Today, IXIS AEW Europe, which changed its name to AEW Europe in early June, controls more than €15 billion of assets.

“We got lucky with our French parent,” says Lewis. “When we integrated with the French business, I argued to keep the Curzon brand in Europe. It let me be big or small. When we want to be little, fast, boutique and Anglo, we are Curzon; when we want to look European with a big established European parent, we are AEW Europe.”

This approach helped open doors to the big German banks, for instance, while not frightening off those who wanted to work with a small nimble operation. Backed up by AEW Europe, Curzon was able to open a series of offices across Europe, expanding the number of employees to 236 professionals.

With €15 billion currently under management, the firm's size might surprise some industry observers, especially since it has only been operating in Europe for eight years. “We said to ourselves: ‘Why tell the market what we are doing?’” says Lewis. “If you were not a client or business partner, you didn't really know the truth about our deals and never knew how we were growing or who we were. Now we have €15 billion under management and we have caught people by surprise. But there is no sneaking up on anyone anymore.”

Boutique investing
AEW Europe manages approximately €6.5 billion through its various property funds, while its direct investment business has approximately €8.1 billion in assets under management. The company also has a small securities business with €400 million under management. The AEW Europe funds are run from Paris, where Jean Lavieille is head of funds; Lewis oversees the Curzon funds from London. Eleven funds are managed by AEW Europe and three by Curzon.

In March, Curzon held its initial closing on its latest fund, PBW II, raising €350 million to invest in the Czech Republic, Hungary, and Poland. The fund, which is named for the key target cities of Prague, Budapest and Warsaw, is managed by CEE head Artur Mokrzycki.

But the firm's largest fund, the €769-million European Property Investors vehicle, is managed by Lewis personally. The fund, which closed in 2004, invests in value-added and opportunistic corporate outsourcing deals in the office, retail and logistics sectors throughout Western Europe.

Though the firm primarily focuses on core-plus vehicles, the EPI fund represented a move up the risk-return spectrum. The fund has a target return of 16 percent—rather than returns of between 11 and 13 percent promised by the firm's other vehicles—and targets leverage of approximately 65 percent, higher than all the others.

“We got lucky with our French parent. When we integrated with the French business, I argued to keep the Curzon brand in Europe. It let me be big or small. When we want to be little, fast, boutique and Anglo, we are Curzon; when we want to look European with a big established European parent, we are AEW Europe.”

Though Lewis declines to comment, the fund is reportedly on the brink of selling the bulk of the German assets it acquired in two separate transactions in 2005. The portfolio contains 35 stores leased to retailer Praktiker and 16 fashion stores leased to Sinn-Leffers. The firm could fetch up to €800 million, which would represent Curzon's most lucrative deal to date.

Lewis says Curzon has been investing in more opportunistic deals in recent years, while opportunistic investors, he argues, have been moving closer to core-plus transactions. This convergence is arguably a result of the pressure to invest capital. But the other pressure on Lewis is managing the assets in the firm's existing funds. The AEW Europe management team sits in Europe while Curzon's headquarters are in London. As the firm continues to grow its geographic footprint and its assets under management, another challenge is to avoid conflicts of interest between all the various funds. Limited partners are becoming increasingly anxious that key fund managers are spreading themselves too thin, or too far removed from the day-to-day management of any given fund. Lewis, however, counters those concerns.

“Despite the size, I still think we act like an entrepreneurial boutique,” he says. “We move quickly, we have discretion, and we get things done just like the private equity firms.”

“I am responsible for all of the funds, and our clients know which ones I am running,” he adds, noting that the firm's investors know they are underwriting Lavieille if they're investing in Paris or Mokrzycki if they're investing in Central and Eastern Europe.

In Curzon's last few funds, repeat investors made up twothirds of the total number of LPs. Curzon Capital Partners II, a core-plus office, retail and logistics fund, with €357 million of equity, attracted 17 investors, including nine repeat investors. The majority of new investors hailed from countries that had previously been unrepresented in Curzon's funds.

“That's the perfect support,” says Lewis. “The support shows your investors are still stamping you with approval and they are all increasing their allocations too.”

Holing out
But like the rest of European fund managers, Curzon has to deliver on the promises it made to those investors in an increasingly competitive environment. Despite falling yields, Lewis, like most fund managers, says there are still opportunities remaining in Europe, especially “if you kiss enough ugly babies.”

Right now, Curzon/AEW Europe is actually selling assets ahead of its business plan due to the strength of demand in the market, but Lewis says the firm will buy approximately €1.5 billion to €2 billion of assets this year. In terms of new investment areas, he points to hotels as one asset class that has been under-exploited on the continent.

“I actually like the European market better than any other because I still think there are opportunities and themes that have still not been discovered,” Lewis says. “Not every stone has been unturned.”

Having put down roots in London—his two daughters were born in the UK—Lewis suggests that he will probably never return to the US to work. After all, he doesn't seem to miss those factories in Maine or the US way of doing business either. “In Europe, people leave money on the table for the benefit of relationships and longevity and the next deal,” he says. “That's a great place to work in.”

Outside of the office, Lewis turns his attention to his other passion: golf. As a self-described golf fanatic, he has been growing Curzon's annual golf outing at the famous Wentworth golf course. Invites have just gome out for the firm's seventh annual event, which will take place on July 12.

Each year, the firm promises a new car to any beginner who shoots a hole-in-one on the Executive Course's sixth hole. Last year, Lewis was so confident after watching the morning's practice shots that he offered a car to anyone who hit a hole-in-one, regardless of which it hole it came on. To his amazement, Ron Seacombe from Curzon's fund operations team, sent a ball careering off the fourth tee, hitting a tree and rebounding against a bank before pinging against the flagstick and going straight into the hole.

“It was like a freak accident,” says Lewis, smiling. “He said: ‘I'm getting the car, I'm getting the car.’ But I told him: 'You are not getting the car, you work for me!' We gave him a holiday and a replica car instead.”

If Curzon can hit a hole-in-one on the sale of its German portfolio, Lewis' smile may be an awful lot bigger the next time you see him.