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PERE Awards 2009: North America 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. PERE March 2010 issue

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 North America results of the PERE Awards 2009.


NORTH AMERICAN INDUSTRY FIGURE OF THE YEAR

1. SHEILA BAIR, Chairman, Federal Deposit Insurance Corporation (FDIC)            
2. Barry Sternlicht, Chairman and Chief Executive Officer, Starwood Capital
3. John Grayken, Chief Executive Officer, Lone Star

Sheila Bair may have already been named one of Time Magazine’s 100 most influential people, but for US real estate investors in 2009 there was only one choice as to who should clinch the title of PERE’s industry

Sheila Bair

figure of the year. Since becoming chairman of the US banking regulator, the Federal Deposit Insurance Corporation, in 2006, Bair has played a key role in shaping the country’s property markets. Not afraid to take her battles public, in 2007 the Kansas Republican was among the first government officials to push the mortgage industry to start taking action over subprime loans. But it was during 2009 that Bair and the FDIC really came into its own. Taking over 140 failed banks, the regulator was particularly active in developing loss-sharing agreements with new investors to entice them to buy failed bank assets. Through the end of 2009, the FDIC had entered into 94 loss share agreements, representing $122 billion in assets. In the summer of 2009, that figure had been roughly 50. There has been much criticism in the real estate industry Bair hasn’t done enough to “pistol whip” banks into marking their assets to market. But as one private equity fund manager noted: “The loss sharing agreements are an elegant solution to the problem facing the FDIC.” And that problem, namely, is the sheer scale of toxic assets sitting on the balance sheets of US banks.


NORTH AMERICAN FIRM OF THE YEAR

1. NORMANDY REAL ESTATE PARTNERS
2. Starwood Capital   
3. Lone Star Funds

It’s difficult to top closing one of the most iconic distressed debt deals of the year on a landmark US office property. However, Morristown, New Jersey-based Normandy Real Estate Partners was about more than just the mezzanine foreclosure of Boston’s John Hancock Tower in 2009. The firm, co-founded by managing principals Finn Wentworth and David Welsh in 2002, also spent the past year aggressively managing its assets, resulting in the signing of more than 1.5 million-square-feet of new leases across Normandy’s Boston and Washington portfolios. One particular highlight was the opening of the historic 13-storeyAmes Building in Boston. After originally buying the property in 2007 for $17.7 million in a joint venture with British real estate investor Richard Kilstock, Boston developer Eamon O’Marah, and US club and restaurant owner Seth Greenberg, known collectively as Ames Hotel Partners, Normandy opened the hotel in November 2009 after a reported $75 million refurbishment. With Boston representing a significant portion of Normandy’s assets, the firm also hired former Broadway leasing and asset management executive Mark Roopenian to lead the firm’s Boston’s central business district leasing activities last June Normandy said at the time Roopenian’s more than 20 years of experience was critical to drive leasing of iconic properties such as the John Hancock Tower.

NORTH AMERICAN DEAL OF THE YEAR

1. JOHN HANCOCK TOWER, BOSTON – Normandy Real Estate Partners and Five Mile Capital Partners
2. Corus Bank loan portfolio
3. Macerich New Jersey and Arizona mall stakes

It took less than two minutes for the John Hancock Tower in Boston to be sold at its mezzanine foreclosure auction last March. With more than 100-people in the room, auctioneer Richard Maltz opened proceedings

Reflection in
John Hancock
Tower, Boston

with bids in increments of $100,000. SL Green Realty, parent of the special servicer Green Loan Services, made the first bid at $20 million. Seconds later Five Mile Capital Partners and Normandy Real Estate Partners bid $20.1 million – and then it was all over. It was a simple end to a complex process for the two firms, which had started buying discounted mezzanine debt positions in June 2008. As Broadway sought to delever its portfolio by selling off properties to support its prime assets, Five Mile and Normandy positioned themselves by snapping up the securitised mezzanine debt both senior and junior to themselves in effort to secure a seat at any foreclosure negotiating table. It was a situation that had scared many equity players away, according to people familiar with the matter, but it left Five Mile and Normandy in the driver’s seat to take over one of the US’ most iconic properties.

NORTH AMERICA FUNDRAISE OF THE YEAR

1. ROCKWOOD REAL ESTATE PARTNERS FUND VIII
2. Starwood Property Trust IPO
3. Square Mile Capital Partners Fund III

2009 was a tough fundraising year by any standards, with just $30 billion of commitments closed for value-added and opportunistic equity strategies last year. Yet despite such a difficult year, there were some firms who successfully managed to close vehicles on significant capital commitments, not least Rockwood Capital. The White Plains, New York-based firm held a final close on its Rockwood Real Estate Partners Fund VIII in March last year, garnering $964 million. Initially launched at the end of 2007, Fund VIII felt the full force of the credit crisis as it developed from simply problems with US residential subprime to a global financial meltdown that took a majority of institutional investors with them. Yet despite those challenges, Rockwood saw roughly half its existing investors re-up and for the first time attracted foreign institutional capital. To date the vehicle has invested approximately $80 million of equity on two deals, including $68 million on the sale-leaseback of student loan company Sallie Mae’s headquarters in Reston, Virginia.


NORTH AMERICAN DEBT INVESTOR OF THE YEAR

1. FIVE MILE CAPITAL PARTNERS      
2. Angelo, Gordon & Co
3. Mesa West Capital

2009 was a headline-making year for Five Mile Capital Partners. Not only did the firm successfully close on the mezzanine foreclosure of Boston’s John Hancock Tower with Normandy Real Estate Partners, but the Stamford, Connecticut-based firm also secured a stake in another iconic US property – the Times Square Building in Manhattan. In a debt-for-equity swap, Five Mile – founded by Gary Holloway, Steven Baum, Thomas Kendall and Konrad Kruger in 2003 – acquired a 50 percent stake in the property in return for cancelling an undisclosed amount of outstanding loan obligations for owner, Africa Israel USA. Africa Israel bought the West 43rd Street building in 2007 for an estimated $525 million, with plans for a gut renovation that pushed the property’s debt load to $800 million. Five Mile is believed to have held a $80 million piece of the property’s mezzanine debt along with other A-note, B-note and mezzanine investors. However, when valuation declines triggered a breach of covenant, Five Mile was able to negotiate a debt restructuring that saw the firm and Africa Israel USA take over the Times Square Center in a 50-50 joint venture. As one of the most successful mezzanine debt players in 2009, Five Mile can only be expected to continue that strategy in 2010.


NORTH AMERICAN PLACEMENT AGENT OF THE YEAR

1. CREDIT SUISSE REAL ESTATE PRIVATE FUND GROUP
2. Probitas Partners
3. Park Hill Real Estate Group

Being a placement agent is no longer just about raising capital for real estate funds. In today’s market, it’s also about advising clients on the best way forward. For Credit Suisse Real Estate Private Fund Group this adjacent work became an increasingly important part of the business in 2009 in the US. From recapitalisations to restructurings, Credit Suisse REPFG worked with GPs as they sought solutions to issues involving legacy portfolios and funds. However, just like GPs, limited partners were also reassessing their portfolios prompting a significant increase in activity in the secondaries space. Raising $3.5 billion of capital globally in 2009, Credit Suisse REPFG saw much of its fundraising work target European and Asia strategies. US strategies though were not being bypassed by investors, with the placement agent – led by Walter Stackler in New York and Bill Thompson and Pamela Wright in San Francisco – helping raise $300 million for Normandy Real Estate Partners’ second fund in 2009. REPFG believes 2010 will be better than 2009, but the group doesn’t expect the industry to experience a massive change in direction. Instead the industry will see gradual shift in investing intentions.

NORTH AMERICAN FUNDS OF FUNDS OF THE YEAR

1.  PARTNERS GROUP
2.  Franklin Templeton Real Estate Advisors
3.  Aviva Investors Global Real Estate Multi-Manager Group

The success of Swiss-based Partners Group in North America must be down to Nan Leake to a certain extent. Leake is responsible for the alternative assets private markets group’s real estate activities in the region. She is a former senior real estate investment officer at the Virginia Retirement System, so she knows what investors want. Neake joined Partners when it merged with her previous employer, Pension Consulting Alliance Real Estate, in 2007. Last year, successes included winning a secondary program led by mandate from a large US pension fund to execute a global secondaries strategy. At the same time, the firm continued to invest in property funds via a global secondaries   mandate, which takes in growth markets. The US team operates offices in San Francisco and New York from where it also covers Latin America investments.


NORTH AMERICA LAW FIRM OF THE YEAR (FUND FORMATION)

1. GOODWIN PROCTER
2. Paul Hastings
3  Clifford Chance

With just $30 billion of capital raised for private equity real estate value-added and opportunistic funds in

Robert
Insolia

2009, last year was a tough environment for any fund manager. Yet despite the trough, Goodwin Procter’s fund formation group saw growing investor activity from large overseas institutional players and sovereign wealth funds eyeing the US for potential investments. Like Credit Suisse REPFG, the law firm said former real estate investors were readying themselves to get back into the asset class, viewing 2009 as the start of a buying opportunity of a generation. With plenty of appetite for programmatic joint ventures, separate accounts and even commingled fund investments, the fund formation practice – led by David Watson in Boston and Robert Insolia in New York and representing 75 fund managers – said 2009 was a time when foreign investors, in particular, dealt with control issues, and the corresponding tax implications, as well as targeting distressed investments. 

NORTH AMERICA LAW FIRM OF THE YEAR (TRANSACTIONS) – joint winners

1.  CLIFFORD CHANCE
1.  KIRKLAND & ELLIS
                  
3.  Simpson Thatcher

When deciding which firm should clinch the title of North America law firm of the year in relation to transactions, PERE readers were torn. In a year when lawyers were put to the ultimate legal test, so many

Stephen
Tomlinson

firms shone through – especially Clifford Chance and Kirkland & Ellis. Jointly taking the title, the two firms were crucial components of some of the US’ largest transactions in 2009, including the bankruptcy filing of mall REIT General Growth Properties and a complex debt restructuring involving debt REIT Anthracite Capital. Kirkland & Ellis’ real estate practice – led by senior partner Stephen Tomlinson in New York – acted as counsel to hundreds of GGP entities after asset-level secured lenders contested the filing for bankruptcy by more than 400 special purpose entities. The claim was ultimately rejected by the bankruptcy court. For Clifford Chance, such legal complexities were also a major feature of 2009, not least in the debt restructuring of Anthracite Capital. The BlackRock-managed commercial real estate financier successfully renegotiated approximately $322 million of secured facilities with three lenders, including Bank of America, Deutsche Bank and Morgan Stanley, a feat that concluded in May 2009 with an extension of maturities on all facilities until the end of September this year and the elimination of all mark to market provisions.


NORTH AMERICA LIMITED PARTNER OF THE YEAR

1.  TEXAS TEACHERS RETIREMENT SYSTEM        
2.  Canada Pension Plan Investment Board
3.  Oregon Investment Council

While most US limited partners largely withdrew from making new commitments to real estate vehicles in 2009 owing to liquidity issues, Texas Teachers Retirement System (TRS) found itself in quite the opposite situation. With a target allocation to the asset class of 10 percent against an actual NAV allocation of 4 percent, TRS became one of the most active US pension investors last year deploying $2.9 billion in fresh commitments. Two highlights included the $410 million direct deal to acquire a 95 percent stake in a portfolio of industrial properties from ProLogis and the $400 million mandate awarded to LaSalle Investment Management to form a new core open-ended fund. The LaSalle vehicle has garnered a total of $1.1 billion of commitments. LaSalle also secured a $200 million co-investment commitment from the pension for other real estate deals. But for Steve LeBlanc, senior managing director of private markets at TRS for the past two years, 2009’s capital outlays won’t be a one-off occurrence. The $87 billion pension is expected to deploy $4 billion to real estate investment strategies in 2010 alone.


NORTH AMERICA BROKER OF THE YEAR

1.  CB RICHARD ELLIS 
2.  NAI Global
3.  Cushman & Wakefield

Deals may have been few and far between in 2009, but that didn’t mean brokers weren’t kept busy dealing

Elihu M.
Harris
Building

with the aftermath of the real estate downturn. Richard Ellis, distress was the name of the game as the Los Angeles-based firm marketed $5 billion of troubled property in the US alone. One of its largest distressed deals came in the $147 million sale of Birmingham, Alabama’s Social Security Administration building to a trio of investors led by real estate investment firm Rainier Capital Management. In what promises to be one of the largest deals of the coming year, CBRE has been awarded the contract to sell and leaseback 17 California state office buildings, including the Elihu M. Harris Building in downtown Oakland, worth nearly $2 billion.