NOVEMBER/DECEMBER 2018 (MAGAZINE)BY CHRISTOPHER O'DEA, RICHARD LOWE
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The 100 largest property fund managers in the world manage €3trn of assets between them
The global real estate investment management industry has almost doubled in size over the past five years, from €1.68trn in 2014 to €3trn today. The sector continues to be swelled by growing allocations from institutional investors and rising asset prices.
The Top 10 continues to shuffle, although Brookfield Asset Management has retained the top spot throughout. During that period, PGIM and CBRE Global Investors swapped places: the former has risen from seventh to second and the latter vice versa.
Third-placed Blackstone has tended to inhabit second or third over the past five years, while fourth-placed Hines started at 13th in 2014.
Fifth-placed Metlife has jumped from 13th last year. After occupying third and fourth spots in recent years, TH Real Estate/Nuveen has slipped to sixth; similarly, UBS has dropped from sixth/seventh to eighth.
Principal Real Estate Investors, which acquired European real estate fund manager Internos Global Investors less than 12 months, rose from 12th last year to 9th. AXA Investment Managers–Real Assets, the largest investment manager of European real estate assets, rose to 10th.
The top 10 companies continue to represent close to one-third of the total AUM of the Top 100 combined. This suggests despite consolidation in the industry, it is difficult for the largest to truly dominate the market. The one exception would seem to be Brookfield, which has put €31bn of space between it and its nearest rival – more than the total AUM of number 36th-ranked Cohen & Steers.
Turn over to see the full top 100 ranking, followed by regional and sector Top 10 breakdowns. Full details of every company that submits data to our Top 100 Real Estate Investment Managers survey are available at the back of the magazine.
Mid-caps get ‘permanent capital’ boost
There has been a round of mergers and acquisitions involving small and mid-cap real estate investment managers in recent months. It has raised the question whether it is a warning sign: a wave of entrepreneurs cashing out at the top of the market, or just a sign of a continued growth of the asset class?
Or put another way, is this a good time to get in, or a good time to get out? As with any investment market, only time will tell if now is the time to jump into (or out of) a business that is clearly enjoying strong capital inflows after a record-long run of positive returns.
The pattern of transactions suggests that major investment management firms believe it is too early to depart the asset class, but that there are ample attractive ways to buy into the club.
For starters, the transactions have taken place across sub-sectors, such as healthcare and education, or specific strategies such as value or opportunistic investing, a sign that many of the deals were done for strategic reasons: to broaden or deepen the acquirer’s expertise in a specialised form of property or investment objective; to increase access to potential deal flow in sub-sectors, which often offer more attractive potential returns than core assets in the primary property food groups; or to expand into a new market or niche.
Several of the investments that large firms have made in smaller shops have been minority stakes, which by definition are not ownership exits by founders. And in most cases, the founders are still involved in the businesses and continue to have meaningful ownership stakes – taking some chips off the table, perhaps, rather than cashing out.
organic growth
Organic growth: Brookfield’s Zuccotti Park in Manhattan is now home to art installation by German artist Isa Genzken
Perhaps the primary indication that the spate of transactions is not driven merely by entrepreneurs selling at the top of a cycle is that many of the new owners are some of the world’s top long-term investors or firms with deep knowledge of property market fundamentals. Allocations to property are already substantial, typically reaching 10% of the assets of many institutional portfolios, and are expected to rise in future years, if at a slower pace. That capital will need to be put to work, creating a source of demand for property investment management expertise across a widening range of property types and sub-sectors.
There is also the rise of ‘permanent capital’ targeting the real estate investment management industry. Permanent capital can provide financing at the corporate level that can reduce the pressure on investment management teams to continually raise new funds to cover operational costs. It is becoming increasingly important in an investment climate that is growing more complex and demanding.
In March, for example, Blackstone’s Strategic Capital Holdings Fund acquired a passive, minority equity stake in Rockpoint, a Boston-based global real estate investment management firm. Terms of the transaction were not disclosed. Strategic Capital Holdings Fund specialises in acquiring long-term interests in leading alternative asset managers – in other words, providing permanent capital to investment management companies. The fund is managed by Blackstone Alternative Asset Management (BAAM), the firm’s hedge fund business. Blackstone had worked with Rockpoint on several debt and equity transactions.
The growth potential of real estate investment management prompted one of the top property services companies, Toronto-based Colliers International, to expand its business into the investment field. In July, Colliers acquired 75% of Harrison Street Real Estate Capital for $450m, a $14.6bn firm based in Chicago with an office in London. the senior management team of Harrison Street continue to own the balance of the equity, and Harrison Street’s co-founder and CEO, Christopher Merrill, continue to lead operations.
The deal created a new investment management platform for Colliers, which posted $2.7bn in revenue in 2017 from operations in 69 countries. Colliers noted that Harrison Street was a pioneer in “demographic-based real estate investing,” a reference to the Chicago firm’s specialisation in education, storage and healthcare sectors.
ric lewis
Ric Lewis, the founder of Tristan Capital
Partners, which sold a 40% stake to New
York Life Investment Management
Other notable M&A deals include Japanese capital seeking to gain access to other markets. Mitsui & Co bought a 20% stake in North American real estate fund manager CIM Group, while Nomura Real Estate acquired a majority interest in UK specialist Lothbury Investment Management.
Chinese capital has also been involved. Citic Capital Hodlings bought a stake in San Francisco-based Stockbridge Capital Group.
Some permanent capital investors are concentrating on the property sector. Tunbridge Partners was formed in 2015 to make minority equity investments in real estate and real asset-focused investment managers. The vehicle was formed by a management team and Hodes Weill & Associates, a real estate advisory firm with a focus on the real estate investment and funds management industry.
Tunbridge recently found an opportunity in Savanna, a New York City-based, vertically integrated real estate investment manager, owner/operator and developer that concentrates on the New York City market. Tunbridge took a passive, minority equity stake in Savanna with an investment made though TK Partners, a consortium of institutional investors led by Tunbridge. Investors in TK Partners include Kudu Investment Management, a firm that specialises in providing permanent capital solutions to leading investment managers.
In addition to capital from large listed financial-services firms, the property investment strategy of Tunbridge had the backing of one of the world’s best-known investors, George Soros. Tunbridge was formed in 2015 as a perpetual life investment company with approximately $500m of shareholder capital behind it from a consortium of investors led by Pine Brook, a private equity firm with experience building financial services businesses, and Quantum Strategic Partners, a private investment fund managed by Soros Fund Management.
Soros Fund Management and Pine Brook are no longer financial backers of Tunbridge. A previous version of this article suggested they were.
Brookfield Asset Management has retained the top position for the sixth year in a row. The Toronto-based investment manager has almost double real estate assets under management of the companies placed ninth and 10th combined. Brookfield is understood to be close to raising $10bn for its latest global real estate fund alone.
Patrizia Immobilien has leapt from 47 to 29 as a result of the integration of TRIUVA, Rockspring and Sparinvest, three fund managers it bought in 2017. Patrizia’s AUM has more than doubled from €19.2bn to €39.1bn. Danish pension funds, including PKA, are backing its latest fund of funds led by the former Sparinvest team.
LaSalle Investment Managementdropped three places in this year’s ranking to 19, its AUM falling from €53.6bn to €48.6bn. This is decline is likely to be reversed next year, when the survey will take into account its acquisitions of Latitude Management Real Estate Investors and Aviva Investors’ real estate multi-manager business. It also took over full control of the €1.7bn pan-European core fund Encore+, which had been managed jointly with Aviva Investors.
Ranking Company Total Real Estate AUM 30/06/18 (€m)
- 1 Brookfield Asset Management 142,968
- 2 PGIM 111,502
▲ 3 The Blackstone Group 102,491
▲ 4 Hines 98,629
▲ 5 MetLife Investment Management 93,409 (1)
▼ 6 TH Real Estate/Nuveen 92,245
▼ 7 CBRE Global Investors 80,100
▼ 8 UBS Asset Management 80,024
▲ 9 Principal Real Estate Investors 71,760
▲ 10 AXA IM - Real Assets 71,233
▼ 11 J.P. Morgan Asset Management 68,560 (1)
▲ 12 Allianz Real Estate 60,062
▲ 13 AEW 59,344
▲ 14 CapitaLand 58,558
- 15 Invesco Real Estate 55,283 (2)
▲ 16 Credit Suisse 50,850
▲ 17 DWS 49,713
New 18 Aberdeen Standard Investments 49,498
▼ 19 LaSalle Investment Management 48,585 (1)
▲ 20 Swiss Life Asset Managers 47,100
▲ 21 Morgan Stanley Investment Management 46,166
▲ 22 APG Asset Management 42,235
- 23 Starwood Capital Group 41,762 (1)
▲ 24 DekaBank Deutsche Girozentrale/Deka Immobilien 40,972
▲ 25 Aviva Investors 40,605 (1)
▼ 26 Tishman Speyer 40,000
New 27 Ivanhoé Cambridge 39,895 (2)
▲ 28 M&G Investments 39,663
▲ 29 PATRIZIA Immobilien 39,112
▲ 30 Prologis 38,254
▼ 31 Barings 37,024
▼ 32 Clarion Partners 37,019 (1)
▲ 33 Union Investment Real Estate 36,836
▼ 34 Colony Capital 36,700
▼ 35 Heitman 35,687
▼ 36 Cohen & Steers Capital Management 30,816
New 37 Oxford Properties Group 29,881
▲ 38 Amundi Real Estate 29,537
▼ 39 Bentall Kennedy 29,345 (1)
▼ 40 BNP Paribas Real Estate Investment Management 29,003 (2)
▼ 41 Generali Real Estate 28,800
▼ 42 Mapletree Investments 28,666 (1)
▼ 43 Goodman 24,282
▼ 44 Global Logistic Properties (GLP) 22,736 (3)
▼ 45 Legal & General IM Real Assets 22,735 (1)
▲ 46 Greystar Real Estate Partners 22,600
▼ 47 AMP Capital 21,308
▼ 48 Syntrus Achmea Real Estate & Finance 21,278
▲ 49 Lendlease 19,083
▲ 50 USAA Real Estate 18,794
▼ 51 Commerz Real 18,717
▼ 52 BlackRock 17,569
▲ 53 IGIS Asset Management 17,405
▲ 54 La Française Global Real Estate Investment Management 17,292
▼ 55 Dexus 17,256
▼ 56 Savills Investment Management 17,250 (4)
- 57 Corestate Capital 17,080
▼ 58 Schroder Real Estate Investment Management 17,036
New 59 Ascendas-Singbridge Group 15,283
▼ 60 Charter Hall 14,709
▲ 61 Gaw Capital 14,524
▼ 62 The GPT Group 14,392
▼ 63 QIC 13,936
▼ 64 Manulife Asset Management 13,807
▼ 65 Apollo Global Management 12,017
▲ 66 Partners Group 11,544
New 67 Rockpoint Group 11,401 (1)
▲ 68 ISPT 10,841
▼ 69 MEAG Munich Ergo Asset Management 10,745
▲ 70 Bouwinvest Real Estate Investors 10,467
▲ 71 Tristan Capital Partners 10,400
▼ 72 Columbia Threadneedle Investments 10,175 (5)
▼ 73 DTZ Investors 9,995
▲ 74 CenterSquare Investment Management 9,897 (6)
▼ 75 KBS 9,706
▲ 76 MN 9,307
- 77 Hermes Investment Management 9,165
▲ 78 Northern Trust Asset Management 8,969
New 79 Ares Management 8,844
▼ 80 Jamestown 8,841
▲ 81 Quadrant Real Estate Advisors 8,648
▼ 82 DRA Advisors 8,584
▲ 83 GreenOak Real Estate 8,537
▼ 84 TA Realty 8,184
- 85 Oaktree Capital Management 8,150
▼ 86 Fidelity International 8,100 (4)
▼ 87 Angelo, Gordon & Co. 7,844 (1)
▼ 88 Sonae Sierra 7,511
- 89 American Realty Advisors 7,411
▼ 90 Redevco 7,400 (4)
▲ 91 Cromwell Property Group 7,300
▲ 92 M7 Real Estate 7,165
▼ 93 GLL Real Estate Partners 7,100
▲ 94 Landmark Partners 7,022
New 95 ARA Private Funds 6,914
▲ 96 Warburg-HIH Invest Real Estate 6,862
▼ 97 KGAL 6,856
▼ 98 Real I.S. 6,819 (1)
▲ 99 Vesteda Investment Management 6,656
▼ 100 BMO Real Estate Partners 6,617 (1)
Source: IPE Research
Footnotes: (1) As at 31/03/18 (2) As at 31/12/17 (3) As at 30/06/17 (4) As at 30/09/18 (5) Includes UK property only (6) As at 31/07/18