2008 Annual Report - The Carlyle Group

Real EstateAcross the Americas, Asia and Europe, Carlyle invests in a diversified mix of real estate sectors,from office, hotel and retail properties to multifamily residential and senior living housing.Through 10 funds, Carlyle’s Real Estate investment teams have achieved a track record of successby applying a value-oriented strategy focused on market fundamentals. In all, Carlyle hasinvested in 414 properties around the world with a total capitalization of $36.2 billion,completed 163 full or partial realizations, and returned $4.9 billion to investors.Carlyle Realty PartnersCarlyle Realty Partners seeks to generate premiumreturns for investors by identifying situations in whichreal estate fundamentals are underpriced by the capitalmarkets and by locating assets in markets with diversetenant demand, supply constraints and exit liquidity.The team targets opportunistic real estate investmentsin the office, hotel, industrial, retail and residentialsectors. Its primary markets are New York,Washington, DC, Los Angeles, San Francisco, Seattle,Florida and Boston. Its focus on active asset management—repositioningassets with capital expendituresand leasing—with a goal of increasing the properties’cash flow has enabled Carlyle to achieve top-tierreturns. When complete, Carlyle then strives to sellthe properties to institutional real estate owners witha lower cost of capital.Carlyle Realty Partners has five active funds witha total of $4.2 billion under management. The teamtargets single assets in situations that enable it to growcash flow at the asset level and be active asset managers.We believe this approach limits Carlyle’s exposureto volatility in the capital markets.In 2008, as part of its 2006 joint venture withCentennial Investments, Carlyle continued to achievestrong net cash flow to equity due to high occupancyand low interest rates. Carlyle and Centennial havenow acquired 19 properties containing 5,879 units.As of December 31, 2008, the properties were 95%leased. Carlyle continues to believe that occupancytrends could remain positive in these markets as littlenew supply is delivered to the market and demandlevels grow.In 2008, Carlyle, in a joint venture with FalconBridge Capital, acquired $538.7 million of residentialbackedmortgage securities. The majority of these securitieswere purchased during late 2008 in distressed salesrelated to hedge fund or repurchase line liquidations.Continued on page 5046 The Carlyle Group 2008