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GreenOak, Bentall Kennedy To Merge In $940M Deal

The holidays are hitting the home stretch, but merger season never ends: A Toronto real estate firm and a New York private equity investment firm are joining forces to create a $1B global investment platform.

Sonny Kalsi at a NYSAREN event March 13, 2018

Bentall Kennedy and GreenOak Real Estate plan to merge next year, forming Bentall GreenOak, an investment firm worth an estimated $940M with $47B in assets under management. Bentall Kennedy CEO Gary Whitelaw will be CEO of Bentall GreenOak, while GreenOak co-founders Sonny Kalsi and John Carraffiel will serve as president and senior managing partner of the U.K. and Europe, respectively.

Bentall Kennedy parent company Sun Life Investment Management will pay GreenOak's owners, which include its founders, senior management team and investor Tetragon Financial Group, $146M in cash in exchange for a 56% stake in the combined company, some of which will be divvied up to Bentall Kennedy's executive team. TFG will own 13% of the company, and GreenOak's leaders will own the other 31%.

TFG Asset Management, the Tetragon subsidiary that owns a share of GreenOak and invests in GreenOak's funds, views the merger as the chance to combine two companies with similar skill sets but different investing strategies.

"What's amazing is there are 21 offices that the combined company will operate out of, and there wasn't a single office overlap," TFG Asset Management head Stephen Prince told Bisnow Wednesday. "The combination was designed to bring together two successful real estate businesses that are well-regarded in two separate ends of the risk-reward spectrum."

Kalsi and Carraffiel founded Manhattan-based GreenOak in 2010, a few years after the pair left their positions as the global co-heads of real estate for Morgan Stanley Real Estate. TFG took an equity stake in the business then and has put money into several of its investment funds.

In the eight years since the company's founding, GreenOak has invested billions in the U.S., Europe and Asia — just this year, it raised funds of $1.55B and $1.1B for investing in the U.S. and Europe, respectively, its biggest yet. It also serves as an alternative lender, part of the growing class of real estate firms that have emerged as lenders as banks have pulled back in the space.

"We’ve been really pleased with the realized returns they’ve had and how quick they get capital back to investors," Prince said. "And as a partner of theirs, it’s incredibly impressive how they built a leading, top-performing real estate manager in the U.S., Europe, Asia over the past eight years."

Toronto-based Bentall Kennedy will bring $36B of the combined firm's $47B assets to the table, and operates in core investing and senior and mezzanine debt in the U.S. and Canada.

GreenOak's primary lending operations are in Europe and Asia, while in the U.S. it targets value-added opportunities in high barrier-to-entry markets. It has made acquisitions in recent months in Manhattan and Washington, D.C.

"GreenOak and Bentall Kennedy are two highly complementary firms with virtually no overlap in investment strategies or offices," Whitelaw said in a statement. “As members of the combined leadership team have worked together before, and given our extensive discussions over many months, we believe we share very similar investment practices, underwriting discipline and client-centric cultures."

The deal is expected to close in the first half of 2019. Berkshire Global Advisors, Weil, Gotshal & Manges, Evercore, Fried, Frank, Harris, Shriver & Jacobson and Covington & Burling all served as advisers in the deal.