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PERE Awards 2009: Global winners

Thousands of PERE readers voted for the individuals, firms and organisations they thought stood out from the crowd in 2009. Here we present the global winners.

2009 was a year in which private equity real estate professionals were put to the ultimate test. However, which firms, individuals and deals stood out from the crowd? Which firms positioned themselves to thrive amid the chaos of the property downturn? PERE and PERENews.com readers voted in their thousands trying to answer such a question.

Here we present the global results of the PERE Awards 2009.

GLOBAL INDUSTRY FIGURE OF THE YEAR

 

1. BARRY STERNLICHT, Chairman and Chief Executive Officer, Starwood Capital
2. John Grayken, Chief Executive Officer, Lone Star
3. Lou Jiwei, Chairman and Chief Executive Officer, China Investment Corporation

2009 was Barry Sternlicht’s year. Not only did the chairman and chief executive officer of Starwood Capital lead the most successful blind pool REIT offering of last year, but his firm also successfully raised $2 billion

Barry
Sternlicht

for its two latest private equity real estate funds. According to people familiar with the matter, the firm secured roughly $1 billion of commitments for each of its vehicles, the $3 billion Starwood Capital Global Hospitality II and the $1.5 billion Starwood Global Opportunity Fund VIII. That comes on top of raising $921 million from public real estate markets for the mortgage REIT Starwood Property Trust in August, and closing on a porfolio of 100 loans, mostly sub-performing and non-performing commercial mortgages and construction loans, from Corus bank for $554.5 million. Sternlicht is an old-hand when it comes to distressed debt plays. Just two years out of business school, it was a 31-year-old Sternlicht that acquired $52 million of multifamily assets through an RTC auction, which he later sold to Sam Zell’s Equity Residential Property Trust for a 20 percent stake in the firm. That stake was worth $180 million when the company went public in 1993, according to Businessweek. As Zell said in the report: “[Sternlicht] is very smart, an awesome player.”

GLOBAL FIRM OF THE YEAR

1. BROOKFIELD ASSET MANAGEMENT
2. China Investment Corporation
3. Lone Star Funds

Whether or not club style investment vehicles work is a debate that raged on throughout the second half of 2009, but the notion of such clubs was barely on people’s lips until Brookfield unveiled its turnaround consortium. Announcing the vehicle on 12 August, Brookfield revealed it had managed to raise $4 billion (later to become $5 billion) of opportunistic investment capital for a global spending programme. The news came amid a backlash by the world’s largest LPs against investing in traditional private-equity style blind pool commingled funds. While others were cancelling or postponing their opportunity funds, Brookfield’s Real Estate Turnaround Consortium managed to attract investments of between $300 million and $1 billion from the likes of China Investment Corporation, Australia’s Future Fund, two of Canada’s pension funds and Singapore’s GIC, according to a report by The Australian. In addition, Toronto-based Brookfield – led by Bruce Flatt – and its sister company, New York-based Brookfield Properties Corporation co-invested $1 billion to the consortium themselves. While it is yet to announce any headline-stealing acquisitions, Brookfield’s strategy of enticing the world’s biggest investors into a club style vehicle clearly captured the imagination of PERE readers. Perhaps Brookfield’s real estate turnaround consortium will also mark a shift in paradigm for large-scale investment in the sector.


GLOBAL DEAL OF THE YEAR

1.  JOHN HANCOCK TOWER, BOSTON
2.  Lehman Brothers Japan non-performing loans acquisition
3.  Songbird Estates recapitalisation

When the landmark Boston skyscraper, the John Hancock Tower, finally made it to foreclosure auction in March 2009 all eyes were focused on the outcome. However the attention wasn’t just owing to the fact that

Reflection in
John Hancock
Tower, Boston

the office tower – originally purchased in 2006 by Broadway Partners for about $1.3 billion – was sold for $20.1 million, plus the assumption of a $640.5 million mortgage.  It was also because of the sheer complexity of the mezzanine foreclosure process. For almost nine months, Normandy Real Estate Partners and Five Mile Capital Partners had been buying up discounted pieces of mezzanine debt secured against some of Broadway Partner’s properties. Broadway is a private equity real estate player that had bought at the height and needed to delever. However, as the firm started to sell its other assets to support its prized properties, acquiring mezzanine positions in the securitised John Hancock Tower deal with a loan-to-own strategy in mind became a risky prospect for all involved. One source familiar with the matter said few parties could accurately calculate who would ultimately be left in the money when foreclosure came, let alone be named controlling holder of the process. There were plenty of surprises along the way for even established lenders, however that honour fell to Normandy and Five Mile who clinched the undisputed deal of the year.

GLOBAL FUNDRAISE OF THE YEAR

1. BROOKFIELD REAL ESTATE TURNAROUND CONSORTIUM
2. Lone Star Real Estate Fund II
3. Orion Europe Real Estate Fund III

According to PERE estimates, a meager $30 billion of capital was raised for value-added and opportunistic real estate investment strategies in 2009. While not an apples-for-apples comparison, the very fact that Brookfield Asset Management could corral $5.5 billion for it’s turnaround consortium speaks volumes as to what the world’s largest investors want today. In August last year, according to report by The Australian, Brookfield managed to attract between $300 million and $1 billion apiece from China Investment Corporation, Australia’s Future Fund, Singapore’s GIC and a couple of Canada’s largest pension funds. Alongside sister company Brookfield Properties Corporation, it also threw in a cool $1 billion of co-investment capital, ensuring that, in total, this would be comfortably the largest pool of aligned capital in 2009.  The capital was pooled to invest in equity and debt in “undervalued” real estate companies or portfolios which Brookfield could add value to by employing “operational restructuring, strategic direction, sponsorship, portfolio repositioning, redevelopment or its other active asset management methods”. Planning investments in North America – where the firm also runs a $1.8 billion real estate funds platform – Europe and Australasia, the consortium aims to make minimum equity investments of $500 million. Nothing else raised last year came close to competing with that kind of firepower.


GLOBAL DEBT INVESTOR OF THE YEAR

1. LONE STAR FUNDS
2. Five Mile Capital Partners
3. Ladder Capital

“Lone Star will be one of the biggest names in private equity real estate over the next three years.” These words, from a rival fund manager, came as PERE gathered research ahead of an inside look at Lone Star and its discreet leader John Grayken last June. Described by another fund manager as a “real estate monster”, the Dallas-based outfit found plenty of prey in 2009. In Europe, Lone Star acquired approximately €5 billion face value of loans, including a reported €2 billion-plus book from Credit Suisse. A significant enough number of these loans were in the UK, so it was little wonder that earlier this year, Lone Star expanded the London operation of its wholly-owned mortgage servicing platform Hudson Advisors. Distressed real estate platform acquisitions may have evaded Lone Star – not least, the residential REIT, New City Residence Investment Corp – but under the leadership of Asia head Takehisa Takamatsu, the firm captured approximately $10 billion of performing and non-performing loans from the detritus of Lehman Brothers for the bargain price of less than $300 million. Given the vast quantity of loans Hudson has to work through, continued expansion at Grayken’s “monster” is predictable and future dominance in this category would surprise no one.


GLOBAL RESTRUCTURING ADVISOR OF THE YEAR

1.  LAZARD
2.  Alvarez & Marshal
3.  Houlihan Lokey

Where there is pain, there is Lazard. Last year, for example, the bank advised on the €14 billion restructuring of Spanish property developer Metrovacesa in one of its highest profile client briefs. The

Richard
Stables

advice involved a debt-for-equity swap leading to a change of control of Metrovacesa and a debt-for-asset swap in relation to part of the outstanding debt. Some of the work with Metrovacesa spilled over into 2010, with Britain’s Barclays Bank acquiring a near 7 percent stake in the Spanish company. Also in Spain, Lazard advised Colonial on the restructuring of its €7 billion debt mountain, involving a mandatory convertible bond issue and the refinancing of the debt held by Colonial through a new long-term facility. Much of the firm’s success in this area is down to its strong bench of senior professionals, led by global co-heads, Richard Stables, Laurent Rossetti and David Kurtz. Stables, who has been with Lazard for 20 years, told the UK’s Independent last year he believed debt advisory and restructuring should be seen as very different skills.“Restructuring is more akin to a mergers and acquisitions deal as you often have issues of change of control, business strategy and disposals to consider, as well as the rebuilding of the whole balance sheet.” In the US, Lazard has also been busy. The firm reportedly advised Capmark Financial Group, which filed for Chapter 11 bankruptcy protection last year.


GLOBAL PLACEMENT AGENT OF THE YEAR

1. CREDIT SUISSE REAL ESTATE PRIVATE FUND GROUP     
2. Probitas Partners
3. CP Eaton

2009 was a tale of two markets for placement agents globally. For much of the past year, investors largely stopped making new commitments as they reassessed their priorities and the market. Yet things changed in the final quarter of 2009, as it became apparent investors of all shapes and sizes were regaining liquidity. For Credit Suisse Real Estate Private Fund Group, led globally by group head Bill Thompson and co-heads Walter Stackler, Pamela Wright and Fredrik Elwing – the final few months of 2009 was marked by former real estate investors returning to the asset class. Indeed, about 50 percent of Credit Suisse REPFG’s activity in 2009 came from investors who had been absent from real estate over the past few years, helping the placement agent close funds with roughly $3.5 billion of commitments. Although down from the annual capital raising peaks of almost $9 billion, Credit Suisse REPFG’s fundraising tally – which included raising €1.3 billion for Orion Capital Manager’s Orion European Real Estate Fund III and $815 million for CLSA Capital Partners’ Fudo Capital II – was widely recognised by PERE readers as the reason why the firm should be awarded the title of not only Global placement agent of the year but also placement firm of the year for North America and Europe as well.

GLOBAL FUNDS OF FUND OF THE YEAR

1. FRANKLIN TEMPLETON REAL ESTATE ADVISORS
2. Partners Group
3. Aviva Investors

As both a GP and LP, funds of funds can offer a unique perspective on the world of private real estate

Jack
Foster

investing. In 2009, that perspective became ever more valuable as partners of all shapes and sizes turned to asset managing legacy investments. With a staff of 25 globally, Franklin Templeton Real Estate Advisors saw much of 2009 as a time for damage control, working closely with funds as they worked through potential financing and valuation issues among other things. Having committed roughly $4 billion to 85 funds through its 20-year history, Franklin’s perspective is especially relevant. Although the New York-based firm – led by managing director and head of global real estate Jack Foster – made few investments in 2009, this year promises to see increasing opportunity for fund investments, not least in the UK, Asia and US. In order to execute future deals, Franklin is expected to hire more staff this year.

GLOBAL LAW FIRM OF THE YEAR (FUND FORMATION)

1. CLIFFORD CHANCE         
2. Paul Hastings                                                                                    
3. Goodwin Procter

Fund formation legal work is no longer just about private equity real estate fund launches. With fundraising severely constricted last year, law firms saw a significant portion of their time dedicated to fund advisory work as well. For Clifford Chance that involved some of the biggest developments in the private equity real estate fund universe in 2009, not least the disposition of Merrill Lynch’s Asian real estate investment management platform. The sale – which was ultimately shelved by Merrill Lynch – included the $2.65 billion Asian Real Estate Opportunity Fund. With more than 30 offices in 21 countries and 3,800 legal advisers, Clifford Chance has been a repeat leader in global fund formation work, last year also advising former Credit Suisse Real Estate Private Fund Group veterans David Hodes and Doug Weill on the launch of their new advisory firm, Hodes Weill & Associates. However, as larger institutional investors looked increasingly to separate accounts and club deals, Clifford Chance was also at the centre of a multi-billion dollar joint venture between Rockspring Property Investment Managers’ and National Pension Service of Korea to invest in prime London assets.

GLOBAL LAW FIRM OF THE YEAR (TRANSACTIONS)

1.  CLIFFORD CHANCE      
2.  Kirkland & Ellis                                                                  
3.  DLA Piper  
                                                         
Global property deals may be down more than 70 percent from the peak of 2007, but for transaction lawyers at Clifford Chance the current real estate downturn has proved as busy a time as any property bubble. As investors work through their legacy acquisitions, firms such as Clifford Chance have focused much of their time on restructuring and advisory work. That will continue into 2010, according to corporate and securities partner Jay Bernstein: “We are not out of the woods by any stretch of the imagination.” For Clifford Chance, 2009 was a year when lawyers helped borrowers overcome a variety of issues. One such highlight was the conversion of NRDC Equity Partners’ $414 million SPAC into a retail-focused REIT after it was unable to acquire a real estate operating company in the required time. Delaware law demanded 100 percent of shareholders back the conversion, however Bernstein – working with partner and M&A co-chair Brian Hoffmann – said the firm was able to lower the threshold to a simple majority and allow non-consenting shareholders to get their money back in what he described as one of the “most gratifying, interesting and challenging transactions” he had taken on.


GLOBAL LIMITED PARTNER OF THE YEAR

1. CHINA INVESTMENT CORPORATION
2. The National Pension Fund of Korea
3. Oregon Investment Council/The Wellcome Trust (tie)

If there was one investor spreading the love in 2009, it was the China Investment Corporation (CIC). In the US, CIC is reputed to have committed $800 million to Morgan Stanley’s Morgan Stanley Real Estate Fund VII Global. In Australia, CIC helped embattled Sydney-based logistics firm Goodman Group by pumping $500 million into the firm. CIC though isn’t just a recapitalisation white knight. The sovereign wealth fund also closed a 40 percent stake in Hong Kong-based fund manager CITIC Capital. The CIC love reached Europe too, when it was one of the participants in the recapitalisation of Morgan Stanley-controlled Songbird Estates, which owns Canary Wharf Group in London. CIC’s strategy is certainly global in scope, with the fund reportedly one of the seven investors in Toronto-based Brookfield Asset Management’s $5 billion turnaround club. Brookfield has never confirmed this, but there is likely more joy to come from the $200 billion wealth fund. CIC met with BlackRock, Invesco and Lone Star Funds in 2009, according to the Wall Street Journal, as it looks to put more reserves to work in US property. The intent is clear. In a year when investors were often sitting on their hands, CIC got up and danced.


GLOBAL BROKER OF THE YEAR

1. NAI GLOBAL
2. Richard Ellis
3. Jones Lang LaSalle

NAI Global president and chief executive officer, Jeff Finn, believes his firm has found its place among private equity real estate firms and judging by this year’s awards victory the sector clearly agrees. “Everyone was active in the private equity real estate space at that time,” he admits, “but we have been able to leverage off that during the down cycle to take advantage of opportunities last year when the market was frozen.” Sure, total investment mandates were down from the firm’s traditional $15 billion a year average (purchases and sales) but only by approximately 15 percent to 20 percent. Typical of an NAI-advised transaction in 2009, Finn recalls brokering a $150 million loan portfolio sale to a private equity firm by a large US national bank. “We are now working with that firm to help them maximise value from the portfolio,” boasts Finn. NAI, which has an 800-professional strong investment team across its network of 325 offices in 55 countries, counts Cerberus Capital Management and Lubert-Adler Real Estate among its clients. Given how its ambition to place itself within the private equity real estate space seems to have paid off with this award, expect that client list to grow.


MIDDLE EAST, NORTH AFRICA FIRM OF THE YEAR

1.  GLOBAL INVESTMENT HOUSE
2.  Abraaj Capital
3.  PetroSaudi International

In a year in which the Middle East was tarnished by Dubai’s runaway debt problem, Global Investment House (GIH) was pleased to pay dividends to investors in its property fund, Global MENA Ijarah Real Estate. The Kuwaiti-based group managed to make cash distributions of 6.5 percent in August, the third quarter of dividends in a row from the pan-Middle East vehicle. This was no small feat. As GIH said last year, the economic situation worsened during the first half of 2009 as continued recession and lack of economic activity took hold. A number of projects were delayed, cancelled or scaled down reflecting lack of bank credit and inadequate liquidity in the system. But GIH reported that a scarcity of funds in the region had led to positive gains. The fund called 40 percent of its committed capital in 2008, which it invested in two projects in Dubai and its own back yard of Kuwait.  GIH as a corporate entity has not emerged unscathed from the downturn, however. In January this year, it announced a plan to split its business in two, creating a real estate holding company and a Global Macro Fund as part of a debt restructuring.

LATIN AMERICA FIRM OF THE YEAR

1. VISION BRAZIL INVESTMENTS, REAL ESTATE
2. Brookfield Asset Management
3. GoldenTree InSite Partners     

2009 was not a great year for fundraising, however a handful of private equity real estate firms did succeed in closing vehicles, including Vision Brazil Investments. The Sao Paulo-based firm raised $210 million for its

Ken Wainer

first dedicated real estate fund, Vision Brazil Real Estate Opportunities Fund I, raising capital from 10 investors, including European and US institutions and pensions. What makes the venture notable is the fact a majority of the capital – 85 percent of which is already allocated – was raised post-September 2008. Co-founded by Ken Wainer in 2006, VBI Real Estate is currently increasing its focus from predominantly office property development and office retrofits in Brazil to include more affordable housing construction. VBI has teamed up with low-income developer Sabia Residencial, and since inception has implemented seven residential developments in the South East of Brazil totalling 3,000 units. For Wainer though, 2009 was a year of getting things done. “It was really thrilling to raise the first fund, but 2009 for us was also about getting our developments rolling.”