$846B Global Asset Manager Federated Hermes Breaks Into U.S. CRE With Fund Acquisition
A Pittsburgh-based money manager with $846B in global assets under management is buying into U.S. commercial real estate for the first time.
Federated Hermes Inc. reached a $331M deal to acquire FCP Fund Manager, a private Maryland-based investment manager better known simply as FCP that has $3.8B in assets under management. The acquisition would add equity and debt covering 75,000 apartments to Federated Hermes’ portfolio.
“This transaction will allow Federated Hermes to enter the U.S. Real Estate Market at a time when the Multifamily sector enjoys strong fundamentals and significant growth opportunities,” CEO J. Christopher Donahue said in a statement.
Federated Hermes will pay $215.8M in cash and $23.2M in stock under the terms of the deal, expected to close in the first half of next year, which also includes up to $92M in multiple years' worth of performance-based incentives.
FCP’s more than 75 staff will stay on and continue to manage its portfolio across 19 markets in 15 states. Its properties include more than 10,000 units in Maryland and more than 8,000 in Florida, Georgia, Texas and Virginia.
In all, Federated Hermes’ acquisition covers 259 properties totaling more than 5.1M SF.
Federated Hermes, founded in the UK in 1983 to manage British pension funds, is looking to expand its private markets and alternative assets portfolio through the acquisition.
The publicly traded firm’s business line that includes private equity, private credit, infrastructure and real estate, and market-neutral strategies had $19B in assets at the end of September, mostly from business outside the U.S.
Federated Hermes’ global private market and alternative investments included $5.5B in real estate at the end of September, according to an investor presentation included with the acquisition announcement. It had $5.2B in private equity, $3.6B in private credit, $2.9B in infrastructure and $1.8B in other liquid alternative assets.
It has a large portfolio in the UK, with a concentration of properties in London. Its largest and best-known development is the 67-acre regeneration of King's Cross in the city's core. The project, which is now majority-owned by AustralianSuper, counts the UK headquarters of Google and Meta as tenants.
Federated Hermes management expects the acquisition will result in a 4-cent boost to the firm’s earnings per share by the end of its 2026 fiscal year, growing to 13 cents per share by the end of 2027, according to the presentation. The transaction has an estimated 13.1% internal rate of return.
Federated Hermes’ stock slid after the deal was announced Thursday and is down nearly 5% this week but up 20% this year.
Management of FCP will retain a 20% ownership stake as part of the deal, which also includes five-year commitments from other key staff to stay on, according to the presentation.
“FCP is uniquely positioned to lead the private market expansion with Federated Hermes into Living sector assets in the U.S.,” FCP founding Managing Partner Esko Korhonen said in a statement. “This transaction provides an opportunity for FCP to strengthen its institutional platform, enhance its growth trajectory, and provide expanded resources.”
