2008 Annual Report - The Carlyle Group

ensure its portfolio investments have sustainable capitalstructures for a longer term while maximizing thereturn on invested equity. If Carlyle is unsuccessful inobtaining viable financing, the portfolio will suffer.For example, despite intensive negotiations, Carlylewas unable to reach an agreement on the financing ofthe Linden-Park project, located in Hanover, Germany,and the project was forced to file for insolvency protectionin 2009.In terms of acquisitions, Carlyle Europe RealEstate Partners remains focused on its core businessof office buildings in need of refurbishment or redevelopment,and takes an opportunistic approach ondistressed situations.Carlyle Asia Real Estate PartnersCarlyle Asia Real Estate Partners ended 2008 with whatwe see as a strong portfolio and approximately $400 millionof uncalled capital commitments. By employing aproactive investment strategy, the team endeavors to generateand evaluate highly selective deals on an exclusive,directly negotiated basis. This approach provides speedand certainty in committing to complex transactions.The team of 20 native investment professionalsbased in Beijing, Hong Kong, Mumbai, Shanghaiand Tokyo targets real estate properties primarily inChina, India and Japan, with a focus on the office,residential, industrial, retail, hotel and senior housingsectors. The team advises two funds, Carlyle AsiaReal Estate Partners, L.P., which launched in 2005 with$411 million in commitments, and Carlyle Asia RealEstate Partners II, L.P., which launched in 2008.We believe that a strong knowledge of local andglobal capital and property markets, combined withclose working relationships with local operating partners,enables the team to create value through activeasset management. Carlyle establishes a businessplan for each investment that identifies strategies tooptimize income and increase the underlying valueof the asset. Close coordination with other Carlyleinvestment professionals, particularly colleagues inAsia, enables Carlyle to maximize the synergistic benefitsof its global platform and differentiate itself fromits competitors.During 2008, Carlyle continued its strategic partnershipwith Tokio Marine Nichido Samuel, a leadingsenior housing operator in Japan, which began in theprevious year. Carlyle also continued to work with itslocal operating partner, S.O.W., to manage its portfolioof midsized retail properties in regional cities acrossJapan. As the portfolio matures, Carlyle’s efforts arefocused on enhancing cash flow, improving tenancy,positioning the centers for potential exits and maximizingtheir underlying value.During the first half of 2008, Carlyle made fourinvestments in real estate properties across Asiatotaling more than $500 million in total capitalization.Three investments were in the senior housingand retail sectors in Japan, and one investment wasin the residential sector in Macau. In the second halfof the year, due to the global credit crisis, the teamfocused primarily on actively managing existingassets in an effort to maximize value and ensure thatthey are stabilized.52 The Carlyle Group 2008