2010AWARDS & AnnuAL REVIEW - PERE

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AnnuAl review | AsiAview Changing of the guard As investment banks backed out of Asia’s private equity real estate sector, PERE considers those primed to take their place. By Jonathan Brasse In Asia, 2010 will be remembered as the year that Wall Street’s presence diminished in the region. The departures of Bank of America Merrill Lynch (BoA ML), Citi Property Investors (CPI) and insurance giant American International Group from the sector were one sign of that. A look at Real Capital Analytics’ 2010 figures for the region highlighted another. According to the research group, Wall Street rivals Goldman Sachs and Morgan Stanley were net sellers in the region to the tune of $1.9 billion and $1 billion, respectively – the fourth and ninth biggest net sellers last year. Indeed, while Morgan Stanley Real Estate Investing (MS- REI) finally achieved a $4.7 billion closing for its seventh global real estate fund in May, PERE learned in December that what the firm is willing to buy in the region had been tempered somewhat. Responding to questions after it closed Morgan Stanley Capital Korea, the firm revealed that its Asia investing strategy had been restricted to value-added and distressed plays in developed markets and growth plays in emerging markets. That no longer included Korea, it noted. Perhaps it is strategy evolution, but Morgan Stanley pulled the curtain down on a 10-year tenure in the country as a consequence of the shift. The market will be fascinated to follow the activities of MSREI’s head of Asia Hoke Slaughter, its chief executive officer for Japan Yoshihiko Shigenari and the rest of the team over the coming year to see if its efforts are truly redeployed elsewhere. Meanwhile, at Goldman Sachs, its last fund was the $2.1 billion Whitehall Street International Real Estate 2008, and there have been no reports of a follow-up fund to date. Furthermore, the almost $2 billion of disposed assets in Asia last year accounted for two-thirds of all its disposals globally, further demonstrating it hasn’t prioritised the region ahead of others. For more context, look again to RCA, which noted that Goldman purchased just two assets in Asia throughout the whole of the year – a 46,000-square-foot office in May and a Labi 1 electronics store three months earlier, both in Japan. Bank of America Merrill Lynch’s departure from principal investing in Asia was possibly PERE’s most coveted story of 2010. No quiet backtracks there, rather a complete exit for the firm. After quelling litigation threats for actions considered non-fiduciary by the LPs of its Asian Real Estate Opportuni- 52 PERE | 2010 AwArds & AnnuAl review 2010 will be remembered as the year that Wall Street’s presence diminished in the region ties Fund via a handsome $650 million settlement, the $2.65 billion fund and its other Asia balance sheet assets now sit with The Blackstone Group. That brings us to the players for 2011. Blackstone had a presence in Asia a couple of years before assuming control of the 50-person BoA ML platform, but its offices in Hong Kong, Tokyo and Mumbai had been pretty quiet until then. The transaction sees it inherit approximately $8 billion of assets to work through and approximately 25 more limited partners with which to work on future investment products. Expect to hear more about platform leaders Chris Heady, Alan Miyasaki and Tuhin Parikh going forward. Likewise, Blackstone’s private equity rival Apollo Global Management. Before picking up Citi Property Investors, Leon Black’s firm – the real estate activities of which are led by industry veteran Joseph Azrack – picked up the smaller Holdfast Capital. Through Holdfast, Apollo acquired the nucleus of a platform led by Colony Capital’s former Asia head Grant Kelley as well as a fund in incubation. The adopted fund, originally focused on Asia’s mature economies including Australia, Japan and Korea, is expected to hold a closing this year. On a smaller scale, a host of companies chose 2010 as the year to graduate from investing on a deal-by-deal basis to trying their hand at blind pool, commingled vehicles. Examples included Hong Kong and Singapore investor Pamfleet Group and Sydney-based LIDIS. Such activity surely stems from increasing positive sentiment from investors towards Asia. According to PERE’s Capital Watch figures, more than $5 billion was raised for Asia-specific value-added and opportunity funds. That was paltry compared to the $18.97 billion raised in 2008, but up from 2009 levels. And while most of the world’s largest LPs are seeking alternatives to traditional commingled funds, that is not true for all of them. Look at the National Pension Service of Korea, for example. It has $1.2 billion of commitments earmarked for higher risk funds in early 2011, a significant portion of which will go to Asia. Additionally, there is a world of smaller investors that have remained faithful to such vehicles. It could have been the Volcker rule, which will limit principal investing by US banks, that prompted a changing of the guard in Asia. More likely, however, it was the dire fortunes of their 2006, 2007 and 2008 vintage funds that sealed the demise of those efforts. Regardless, PERE has a new breed to write about, ensuring that 2011 stands to be a most interesting year.
ThE DEfInITIvE guIDE TO rEal EsTaTE InvEsTIng EdItEd By CaPITal & MarkETIng grOuP Twenty five experienced and highly regarded investment professionals analyse their chosen real estate investment strategies to help you make informed investment decisions for your current or future fund. Includes studies and insights on: • Attractive established markets including North America, Asia Pacific, the Nordic region, France and Germany, and popular emerging markets China, India and Brazil • Opportunities in residential, office, retail, industrial/logistics, secondaries, distressed real estate and debt • How diverse investment strategies will influence your future fundraising Contributions from: JPMorgan Asset Management, ING Real Estate Investment Management, Citic Capital, Landmark Partners, Grosvenor and more... View full contents and download an extract at: www.peimedia.com/reinvesting Order your copy today: Online www.peimedia.com/reinvesting Phone +44 (0)20 7566 5444 Email fran.h@peimedia.com
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MAR 2011 | perenews.com FOR THE WOR
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2010AWARDS & AnnuAL REVIEW - PERE

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