London-Based Fund Managers Are Selling Themselves In Droves
In the space of just 10 weeks, four of London’s best-known fund managers have found new owners, and a fifth Munich-based manager also changed hands.
A wave of mergers and acquisitions in the European property fund management world has been predicted since the credit crunch, and there have been sporadic individual deals; CBRE GI’s purchase of ING REIM, BlackRock’s purchase of MGPA, Mitsubishi Estate’s purchase of Europa Capital and Fosun’s purchase of Resolution Property being the prime examples.
But the trend has now cranked up in earnest.
What links these recent deals? The owners of almost all of the companies being acquired are taking advantage of a unique window to cash in their chips. The partners of these firms are in their 40s or 50s; old enough to have built valuable business they now want to monetise; but young enough that they will stick around for a while and manage the business for the new owners rather than just retiring as soon as possible.
If there are any other midsize firms with owners of a similar age, watch out for future deals. Here are the details of the five sales.
Internos consumed by Principal
Kicking off the wave of M&A was Jos Short and Andrew Thornton’s Internos Global, which was bought by U.S. giant Principal Global Investors for a reported price of €40M-€50M. Principal dwarfs Internos, with $75B of real estate assets under management compared to Internos’ €3.3B, but Principal has effectively no exposure to Europe, and so will use Internos to expand in the Old World. Internos has a strong background in alternative asset classes like hotels, care homes, student accommodation and residential.
Patrizia buys Rockspring
The biggest deal in terms of creating a combined European group was the purchase of Rockspring Property Investment Managers by Patrizia, for a reported price of €100M. Adding Rockspring’s €7.9B of assets under management makes Augsburg-based Patrizia a €40B firm, catapulting it into the 30 largest managers in the world. The role of senior Rockspring management like partners Robert Gilchrist and Edmund Cranston is not yet public.
Brockton undertakes sale and strategy switch
Perhaps the most radical of the current wave of deals is that undertaken by Brockton Capital. It sold a controlling stake in its business to Israeli investor Alony Hetz Property and Investment.
Previously an opportunity-fund manager, for new investments it has formed a perpetual-life company called Brockton Everlast that will invest in lower-risk London assets. An initial investment by Alony of £40M in the coming weeks will be supplemented by £150M later this year and £150M in 2019. Brockton’s management will invest an initial £13M in the new business, followed by £30M over the coming years. Brockton Everlast will carry on managing Brockton’s existing opportunity funds, which have raised £1.5B since the company was formed in 2005. It has paid £40M for the existing business.
Tristan sells a stake, with potential further sales to come
The biggest fund manager to sell a piece of itself is Tristan Capital, which has €9.1B of assets under management across value-add and core-plus funds. It sold an initial 40% stake in its equity to European manager Candriam Investors, an affiliate of New York Life Investment Management, with an option for Candriam to increase its stake in the future. Candriam has $112B in assets under management, but this will be its first move into real estate. It is the third time Tristan founder Ric Lewis has built up and sold a fund management business.
Macquarie more than doubles real estate presence
Slightly further afield, Australian investment bank Macquarie has bought Munich-based fund manager GLL. The €7B fund manager will be combined with Macquarie Infrastructure and Real Assets to create a €10.6B manager.
To hear from some of the biggest and most dynamic fund managers in real estate join Bisnow's London 2018 Capital Markets Forecast on 22 February at 7.30am at Merchant Taylor's Hall.