The rapid rise in interest rates is drastically changing the world of investment managers in Europe. Deal flow has shrunk by 60%. PropertyEU investigated who still has the best cards.
In the Netherlands, the rule among investors is that the best investments are made in a bad market. Ralph Rosenberg, head of European real estate at KKR, puts it more provocatively: he is now talking about a ‘once-in-a-decade investing opportunity’. That may be the case, but they must be parties with deep pockets, or parties with underlying investors with deep pockets. They must be able to strike in time. Robin Marriott and Virna Asara of PropertyEU took to the market to ask who will be the first to benefit from the misery of others.
During the round table discussion with lawyers from PropertyNL, Allen & Overy brought up a new phenomenon: lease to own – financiers who take over loans with the idea that they can become owners of the underlying real estate at a very advantageous price when the owners collapse. An almost cynical Anglo-Saxon approach, which contrasts with the real estate bank’s old values of guiding customers through difficult times with ‘smoothing and lagging’ (and not being left with too large a special management department). In the game that financiers are currently playing, they must be able to switch roles. They must also want to be an investor. No longer as before, with special management against will and thanks, but consciously. This is where the greatest profits can be achieved in the future. Strike when the market is stuck. Who can do that? Marriott and Asara came up with a list of ten candidates who will distribute European real estate.
1 – Cale Street Partners
This London financier focuses on large financing deals from €200 million to €1 billion. The club was founded by Ed Siskind, the former global real estate executive at Goldman Sachs. He raises his own money from the Kuwaiti Investment Authority. Siskind leaves his old employer with top people such as Ramon Camina and was able to provide himself with continental expertise by recruiting the former boss of Deutsche Bank’s European real estate.
2 – Ares Management
This American club made Philip Moore head of European real estate and things have been going at a crescendo ever since. € 1.1 billion in real estate financing was concluded in 15 months.
3 – Apollo Management
The asset manager from New York distinguished itself in Europe with Skardon Baker’s London team. Apollo combines equity with debt capital or, as Baker calls it, ‘unique and flexible capital’. Apollo – financed with American pension capital – is not afraid of risk deals. For example, the asset manager was at the helm of the rescue of the German Vonovia.
4 – Blackstone
The power of Blackstone is that sometimes a deal simply cannot be done. For example, the investor bought NIBC and brought the Dutch real estate and investment bank back onto the market much faster than expected. However, when investors did not act in the way the company had expected, the order ‘not for a while’ came. There will be enough deals left, the head of European acquisition, Samir Amichi, must have thought. In the PropertyEU Top-100 Dealmakers, Blackstone was in first place with €21.1 billion in transactions in 2022. James Seppala, head of European real estate, does not want to speak of a European crisis.
5 – Cheyne Capital Real Estate
Cheyne Capital, with headquarters in London, is relatively unknown in the Netherlands, but PropertyEU describes the company as ‘one of Europe’s leading alternative investment managers’. It has €10 billion under management. That is not too bad in the European playing field, but Cheyne distinguishes itself with investments in sustainability and does not shy away from the market for housing for the elderly. Raphael Smadja and Daniel Schuldes are jointly in charge of Europe.
6 – Starwood Capital
In the ranking, Starwood is the most highly qualified player in the field of opportunistic real estate investments. The US track record mentions $100 billion in commercial real estate loans. The European expansion is thanks to Lorcain Egan. Egan was vice president of Barclays Bank and was one of the first to identify opportunities for non-bank financing.
7 – KKR
KKR is probably the best-known American private equity club and should not be missing from any ranking of dominant real estate players. Ralph Rosenberg, global head of real estate, thinks that many opportunities will arise because parties no longer have access to loans, a nice way of saying that they will collapse. Like many colleagues, they see great prospects in Europe. KKR is putting forward Ali Imraan in Europe, who has made his mark at Citibank, Royal Bank of Scotland and LaSalle.
8 – Brookfield Asset Management
Brookfield is a Canadian company that focuses on Europe and has already collected € 45 billion in real estate. The company is seen as one of the companies with the most firepower to invest in problematic real estate. Brad Hyler is the managing partner for Europe.
9 – LaSalle Investment Management
In the Netherlands, market leader in real estate advice CBRE is sometimes confused with CBRE Investment Management. JLL has it a little easier in that respect because LaSalle operates under a different name. Cushman &Wakefield has also chosen to allow DTZ Investment Management to survive. Anyway, only LaSalle appears in this list, thanks to Michael Zerda, co-cio Europe. He’s from Blackstone, which shows it’s a small world. The top 10 regularly kill each other by buying away successful employees and teams. LaSalle recently put itself on the map with the refinancing of €325 million from a Spanish hotel chain. The company does not shy away from niches and also finances designer outlets, for example.
10 – Bentall Green Oak
Bentall is very active in the United Kingdom with smaller tickets, in the range of €5 million to €200 million. The Canadian Sun Life provided capital for Bentall in the past. Jim Blakemore is the big man and Laura Manthe is responsible for real estate financing.
The Netherlands
In the Netherlands there is also a party that is comparable to the European ‘movers & shakers’: Axeco, founded by former Kempen & Co directors. They do major deals for the Dutch market, such as the takeover of Van Wanrooy by Heijmans, loans for Amvest of € 125 million and work for real estate stock exchange funds such as NSI and Vastned. In doing so, they determine for Europe how ownership relationships in real estate will change in the coming years.
Published in PropertyNL Magazine no. 9, September 29, 2023