DEC 2016/JAN 2017 | perenews.com
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EDITOR’S LETTER
A pivotal time already
After pulling together this, our second annual special magazine focused exclusively on private
real estate secondaries investing, I have come away with the belief that this most intriguing of
marketplaces is at a pivotal time in its evolution.
By most assessments, volumes have increased year on year since trading began back in the
late nineties and exponentially since the global financial crisis. Last year saw an almighty $8.2
billion of secondaries trade, a 71 percent rise on 2014’s aggregate figure of $4.8 billion, according
to Connecticut-based Landmark Partners. Its research tracks just value-add and opportunistic
fund trades, but even those firms which add lower risk and return strategies into the mix agree
volumes went only northward.
Whether the capital markets match the transaction markets remains to be seen. Certainly,
in going for firm-record fundraises, the sector’s pacesetters, Landmark and Zug-headquartered
Partners Group, believe in putting even greater amounts of money to work now than ever
before. The sectors other heavyweights, New York’s Strategic Partners and Madison Realty
Capital already have held $1 billion-plus capital raises for their latest vehicles, further suggesting
institutional appetite for real estate, including via secondaries investments, remains at an alltime high.
But when we drill down into last year’s volume, it is reasonable to posit that 2016’s total will
come in significantly lower. That is because, last year, a number of private real estate’s biggest
indirect players underwent comprehensive portfolio restructuring exercises. Take the largest US
pension fund, California Public Employees’ Retirement System. In a bid to reduce its manager
relationships and to extricate itself from a number of opportunistic real estate funds raised preglobal financial crisis, it sold approximately $3 billion of positions to Strategic Partners. Harvard
and GIC Private underwent similar exercises. Assuming the folks in charge at these institutions
are not schizophrenic – and I am assuming they are not – I would expect these to be one-time
occurrences.
There were fewer such transactions in 2016 and, as such, volume is expected to be way down
this year. Kenneth Wisdom of Portfolio Advisors, and one of our roundtablers, predicted 2016’s
total will be more like $4 billion come the end of the year.
If so, where will the growing pools of capital be deployed? Restructuring situations is the
common answer. Andy Nick of secondaries advisory specialist Greenhill Cogent believes the
rationalizing of tail-end funds via secondaries trades will become commonplace, much like it
is in the more established private equity secondaries marketplace. For him, what previously
represented about 15 percent of his firm’s fee revenue may well account for 30 percent plus next
year. If the consensus response is right, then we can believe that 2016’s dip in volume is just that,
a dip with restructuring-based deals replacing portfolio offloads.
If not, we might well regard private real estate secondaries in its prime as only a reaction to the
global financial crisis and, going forward, a transaction type that is only sporadically relevant.
My hunch is the consensus is right, but let us see.
Enjoy the issue,
Jonathan Brasse
Senior Editor
DEC 2016/JAN 2017 | PERE
1
IN THIS ISSUE
ISSN 1558-7177
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4 Bigger than ever
Two major real estate secondaries fundraises show the strength of the
market and investor appetite for the investment strategy. By Meghan Morris
6 From stigmatized to accepted
Bill Thompson and Andy Nick of Greenhill Cogent recount how private real
estate secondaries has matured from being one-dimensional and liquiditydriven to an increasingly accepted portfolio management and restructuring
tool. By Jonathan Brasse
10 Dispensing with tradition
Full pricing in the ‘traditional’ secondaries market is leading global
investment manager Partners Group to take on more ‘non-traditional’
secondaries to find compelling returns for its investors. By Thomas Duffell
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Roundtable: looking to 2017, p. 14
14 Challenges to momentum
Private real estate secondaries has grown exponentially as an institutional
marketplace in recent times. But next year could see a change say
the participants at PERE’s second annual secondaries roundtable.
By Stuart Watson
21 Real estate’s greater burden
Tax ramifications should be a foremost consideration when
approaching private real estate secondaries trades, not least
because these have extra layers to consider than their private equity
counterparts. By Meghan Morris
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Make the right move: know your tax status, p. 21
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PERE | DEC 2016/JAN 2017
Secondaries funds for the private real estate sector are a niche area,
but 2016 saw a growing number reach final close, according to PERE
research.
28 The best is yet to come
Deal volume may be falling for the second year in a row, but innovative
transactions and a hostile takeover bid keep private equity secondaries
in the headlines. By Adam Le
NEWS IN NUMBERS
Secondaries snapshot
Some of the key figures that hit the headlines in 2017
$550m
$840m
$3.9bn
CBRE Global
Investment
Partners’ final
close on its
European ValueAdd Fund
Estimated 2016 transaction volume
for real estate secondaries in Setter
Capital’s mid-year report
Close for Metropolitan
Real Estate’s first
secondaries fund
$2bn
Landmark Partners’ target
for its latest secondaries
real estate fund
$171.5m
Amount Religare paid
in December 2010 for
a 55 percent stake in
Landmark
$440m
Amount over
target Madison
International
Realty closed its
$1.39 billion sixth
real estate fund
20
Investors in the
Townsend Group’s
latest real estate
fund of funds
5
Fund positions sold
by New Zealand
Superannuation Fund
to Partners Group
15%
CalSTRS’ real
estate portfolio held
in pre-crisis funds
18
Months in market for
Strategic Partners’ first
dedicated real estate
secondaries fund
2
Years between
Partners Group’s last
and current fundraise
71%
Increase in global real estate
transactions from 2014 to 2015,
according to Landmark
DEC 2016/JAN 2017 | PERE
3
NEWS | SECONDARIES
FUNDS
Bigger than ever
Two major real estate secondaries fundraises show the strength of the market
and investor appetite for the investment strategy. By Meghan Morris
More capital is set to engage the real estate secondaries
York-based Blackstone. One head of a secondaries advisory
market, with two major fundraises launched this fall.
firm, who declined to be named, said Strategic’s fundraise,
Landmark Partners and Partners Group are both in the
which hit its hard-cap, was a good harbinger of investor
market with their latest vehicles, which together will likely
demand for this strategy.
raise billions for the secondaries space. Both firms declined
But he warned: “It probably puts pressure on returns
to comment, but PERE understands that Simsbury,
for buyers and increases prices for sellers. If there is more
Connecticut-based Landmark is targeting $2 billion – the
capital, that’s good for selling limited partners and it puts
largest amount ever sought for the
some pressure on returns.”
asset class – for Landmark Real Estate
The executive noted two areas of
“If there is more capital,
Partners VIII, twice the size of its
concern for the market: slower deal
that’s good for selling
predecessor vehicle. Landmark Real
volume in the underlying property
limited
partners
and
it
puts
Estate Partners VII, the second-largest
market overall and investors shifting
some pressure on returns”
pool of dedicated capital ever raised
from traditional commingled funds to
for real estate secondaries, closed on
separate accounts and other structures.
its $1.6 billion hard-cap in May 2015 after 14 months of
Deal volume in real estate secondaries fell almost 37
fundraising, according to PERE data.
percent in the first half of 2016 to $1.8 billion, according
Not to be outdone, Zug, Switzerland-based Partners has
to secondary brokerage Setter Capital. Respondents to a
also returned to the fundraising trail with Partners Group
survey by the firm estimated that full-year deal volume will
Real Estate Secondary 2017, although the target has not
be $3.9 billion, down from $9.2 billion in the full-year 2015.
yet been publicly disclosed. The firm’s last fund, Partners
“Although volume is expected to be lower this year,
Group Real Estate Secondary 2013, closed on $1.95 billion,
real estate secondaries are on the rise as more limited
nearly double its target, making it the biggest dedicated
partners get comfortable with executing sales and general
real estate secondaries fund ever raised.
partners use the secondary market as a way to liquidate
The latest capital raises follow Strategic Partners’
and restructure older funds,” Peter McGrath, Setter’s
$1.3 billion September close of Strategic Partners Real
co-founder, told PERE.
Estate Fund VI, the firm’s first dedicated real estate
GPs should take note of these large secondaries
secondaries fund since its 2013 acquisition by New
fundraises, the unnamed secondaries advisory executive
said, as they will provide LPs with more opportunities to
trade out of funds, particularly for funds raised around
2010. Those vintage funds are now reaching the period
Top 5 real estate secondaries
when they are more likely to be traded, because return
expectations typically become clearer around the sixth
fund closings ($bn)
year of a fund’s life.
He added that there will be no shortage of opportunities
Partners Group Real Estate
1.95
for
Landmark and Partners to deploy capital from these
Secondary 2013
Landmark Real Estate
potentially record-setting funds.
1.60
Partners VII
“The fundamental premise, which is providing
Partners Group Real Estate
1.50
liquidity to an illiquid asset class, will still be here,” the
Secondary 2009
executive said, noting that some people in the industry
Madison International Real
1.40
Estate Liquidity Fund VI
have for years warned that too much capital was chasing
Strategic Partners Real
1.30
the strategy. “Chief investment officers change, the market
Estate Fund VI
changes and people want to reallocate capital from one
Source: PERE
area to another.”
4
PERE | DEC 2016/JAN 2017
TOP STORIES | SECONDARIES
1
METROPOLITAN CLOSES SECONDARIES FUND
Metropolitan Real Estate, part of Washington, DC-based Carlyle
Group, closed on $550 million for its Metropolitan Real Estate
Partners Secondaries & Co-Investments Program in February. The fund
had a $450 million target but no hard-cap.
It was the first time Metropolitan had raised a vehicle since being
acquired by Carlyle in 2013 and its first secondaries fund ever. The
fundraising process began in 2014 and the firm held
a first close in July 2014 on $70 million.
“We were the new kids on the block at Carlyle,”
said David Sherman, Metropolitan co-founder and
co-chief investment officer. “It took a while to get
momentum in the market. It also took a while to
fully integrate with our parent Carlyle. It did not
really come together until sometime in 2015.”
The fund is split in three sleeves, offering investors
Sherman:
the choice to invest only in secondaries, only in
momentum a long
time coming
co-investments, or in both, with the interest in
secondaries being slightly larger. Limited partners
in the fund are global and include pension plans, ultra-high-net-worth
individuals and insurance companies. The target for GP contribution
was 1 percent but it was exceeded, according to the firm. The fund has
a 1 percent management fee and would earn 10 percent carried interest,
according to documents presented in May to the City of Jacksonville
Police and Fire Pension Fund.
2
CALSTRS CONSIDERS RE SALE
California State Teachers’ Retirement System, the world’s largest
educator-only pension fund, is considering selling fund stakes
from its private equity real estate portfolio, PERE reported in October.
Sacramento-based CalSTRS, which holds $25.7 billion in real estate
assets, is working with investment bank Lazard to identify assets to
sell. The process is likely to involve closed-ended and value-added
opportunistic funds. CalSTRS could offer a portfolio worth about
$1 billion or could break it down into several smaller portfolios in the
hundreds of millions of dollars.
The pension system said in its investments branch business plan
for fiscal year 2016-17 that about $4 billion of its real estate portfolio,
representing about 15 percent, is held in pre-crisis closed-end
funds. “These older funds have impaired our performance; staff will
aggressively push for liquidation over the next three years,” the plan
noted.
CalSTRS will also aim to liquidate non-strategic assets and target
investments to lower risk strategies, as well as review relationships to
ensure alignment of interests and focused strategies, according to the
plan. CalSTRS was slightly underweight in real estate, with 13.3 percent
of its portfolio invested in the strategy as of September 30. Its target
allocation is 14 percent.
Best of the rest in the last 12 months
PERENews.com (Secondaries)
3
CBRE WRAPS EURO FUND
CBRE Global Investment Partners
raised its biggest closed-ended fund, closing
its European Value-Add Fund in February on
$840 million.
4
PARTNERS’ DISCOUNTED
SECONDARIES BUY
In the spring, Partners Group purchased a
fund portfolio worth $500 million from New
Zealand Superannuation Fund at a discount.
5
PARTNERS ESTABLISHES US BASE
Partners Group created a new Americas
headquarters in Denver, Colorado, to support
the continued growth of its operations in the
region.
6
TOWNSEND CLOSES LATEST FUND
The Townsend Group closed its most
recent real estate fund of funds, Townsend
Real Estate Alpha Fund II, in February on
$496 million.
7
CROCKETT DEPARTS CBRE
Nick Crockett, the executive director of
CBRE’s Capital Advisors team in Asia-Pacific,
left at the end of November.
8
PARTNERS LAUNCHES LATEST FUND
Partners Group is marketing a real estate
secondaries fund two years after its predecessor
vehicle closed on a record $1.95 billion.
9
RELIGARE EXITS LANDMARK STAKE
In April, Landmark Partners’ owner
Religare Enterprises sold its majority
holding back to the firm and other minority
shareholders.
10
RE SECONDARIES VOLUME
JUMPS TO $8.2BN
Landmark said transactions in the real estate
secondaries market totaled $8.2 billion in
2015, up 71 percent from 2014.
DEC 2016/JAN 2017 | PERE
5
KEYNOTE INTERVIEW | GREENHILL COGENT
From stigmatized to accepted
Greenhill’s Bill Thompson, co-head of capital advisory, and Andy Nick, a managing
director at Greenhill Cogent, recount how private real estate secondaries has
matured from being one-dimensional and liquidity-driven to an increasingly
accepted portfolio management and restructuring tool. By Jonathan Brasse
PERE: Let’s start at the beginning. Talk us through the first
private real estate secondaries trades.
Andy Nick: Pre-global financial crisis, the real estate sales
that we saw were primarily driven by sellers needing liquidity.
It was less about specific funds, more about generating
cash. But we saw quite the shift during the crisis as limited
partners got their heads around issues, mainly relating to
global opportunistic funds as those were the most impacted
by falling property values. Some had leverage facilities that
meant, at that time, there was no equity in them at all. We
saw a number of sellers rush for the exit, but, to be frank,
there wasn’t much of a market because buyers saw the same
issues with these funds. It was not until 2011 when we really
saw volume build. That year, about $2 billion traded. It was
a time when people could start to pare down their pre-crisis
exposure to opportunity funds.
Bill Thompson: Of course, by that time the private
equity secondary space had been around and growing for
quite some time. In 2011, the overall secondaries market,
including predominately private equity and a small amount
of real estate, was probably around $22 billion in size.
Andy Nick: We didn’t even break real estate out as a
standalone category in our market data during the global
financial crisis, because it was such a de minimis amount. But
given our position advising on private equity secondaries,
we were in a pretty unique spot as people approached us to
Thompson: boundaries
stretched, sometimes broken
6
PERE | DEC 2016/JAN 2017
Nick: turned the corner on
stigma
sort out their real estate allocation in a similar way postcrisis. From a standing point on the heels of the crisis, after
property values, and therefore fund NAVs, had been written
down, we started to see some real estate volume transact.
PERE: In the early stages, private real estate secondaries
was predominantly about LP to LP trading in opportunistic
funds, but the market has evolved significantly since then to
include other types of trades as well. Has that made volume
harder to assess?
AN: Sentiment has indeed shifted post-crisis and is
comprised of much more than only opportunistic funds.
BT: Traditional secondaries in real estate focused on higher
risk and return strategies and was related to closed-ended
funds as opposed to the bigger, open-ended funds that had
built-in liquidity mechanisms.
AN: And today, I think, from a volume perspective, the
lion’s share still is from the closed-ended funds which are
value-added and opportunistic in nature, although we have
had conversations with folks about selling out of certain
open-ended funds as well.
BT: But I think that’s the interesting thing. People are
now viewing secondaries as more than just a liquidity
mechanism. Today people use secondaries as much more
of a portfolio management tool, which is what the private
equity guys were doing a while ago. In real estate, it used to
be if you were doing a secondary trade, it was a black mark,
or related to an asset or fund not performing well. But that
is not the case today. It is totally different now.
PERE: But the stigma has not been completely removed
otherwise this marketplace would be more transparent in
nature surely?
AN: I think it depends on who you talk to. Certainly, the
private equity market is more established in both volume
and its perception. We still talk to real estate GPs that
haven’t had a secondary trade yet and we end up working
on their first as part of the process we are running for an
LP. So you do occasionally still find an outlier view that
a sale is something negative for the GP or the LP selling.
But I posit that the vast majority of market participants feel
PERE: In what other ways has the private real estate
secondaries sector evolved?
AN: Another thing we’ve seen happening in private equity
PERE: In the case of fund restructurings, the GP can
for some time is LPs wanting co-investments. And so
sometimes even be the instigator of a secondaries trade.
we’ve sold many direct interests in companies alongside
BT: Yes, in certain situations, GPs are initiating dialog
investment funds. We haven’t done as much of that on the
regarding secondaries to solve issues related to older funds
real estate side but I think that’s because the primary side
or to introduce new investors and that is a whole different
in the real estate co-investment market is more nascent.
ball game than traditional LP to LP secondaries.
We’ll probably see greater volume in a few years.
AN: Certainly in the restructurings we’ve gotten involved
Beyond the tender offers we discussed, I think you
with there is a business plan that still needs to be executed
will also start to see more full wind-downs of funds via
on and so holding the assets for
secondary processes. Let’s say there
another, say three years, makes a
is a manager with a fund that is 12
“In the early days of
lot more sense than selling today.
years old but still has five properties
secondaries, the impetus for
Those are often the ones that come
left. Perhaps the manager is no
most trades was either seller
to market and are likely to get
longer raising funds and there have
liquidity issues or poor asset
done, as there is a logical reason for
been team departures. Instead of
performance. But that is not the
the transaction to take place. You
selling properties individually
case today.The market is
may have certain LPs that want or
using local brokers or selling to
totally different now”
need liquidity sooner.
traditional real estate investors, a
As the market has evolved,
wind-down via a secondary sale
transactions have become more LP-friendly. The first
becomes more viable and is much quicker to execute.
private equity restructurings didn’t leave the LPs with
BT: I co-head our capital advisory business which includes
many choices. But what we’re seeing today is that investors
a secondaries business alongside a primaries business.
are given more options. Those wanting to stay in a vehicle
Although I’ve been spending 90 percent of my time on
are able to do so on the same economics – no penalty for
the primary side, Andy and I have interacted a lot of late
extending. They are being given a form of tender offer or a
as secondaries has spilled over from where they were to
free option to take liquidity if they so desire.
where they are now. Boundaries have been stretched and in
BT: In some cases these days, you might have a manager
some cases, broken. And I think that trend will certainly
that is seven or eight years into a fund. The investors are
continue.
generally happy but some might want to go in a different
direction or want liquidity. They’d be happy to get out
at this stage of the game without forcing sales. In these
Greenhill & Co.’s Capital Advisory group includes
scenarios, the GP can now swap an old LP for a new LP.
two complementary businesses, Real Assets Capital
That meets the needs of both the existing LPs that want
Advisory (RACA) and Greenhill Cogent, involving
to stay in and of the new and attractive capital provider,
over 60 professionals in 10 markets worldwide. RACA
which is good for the GP from an operational perspective.
raises capital for real asset sponsors and has been
It is the new normal.
involved in 45 fundraisings totaling ~$20 billion
since 2010 at Greenhill and an additional $42 billion
PERE: Should we imagine then that increasing amounts
in a predecessor business. Greenhill Cogent offers
of your advisory work relates to this type of secondaries
advisory services focused on the secondary market
trading?
for alternative assets, including working with leading
AN: I would say these types of transactions are probably 20
institutional investors on utilizing the secondary
to 30 percent of total volume, market wide. For us, because
market to actively manage their private equity and real
historically we’ve had a leadership position in traditional
estate fund portfolios. Greenhill Cogent has advised
LP to LP trades, it has been closer to 10 to 15 percent of
over 80 investors on the sale of over $24 billion in real
our volume. But I think, going forward, it’ll be a higher
estate fund commitments and also works closely with
managers seeking to generate liquidity for investors
proportion, maybe even as much as a third of our revenue
and/or to restructure or recapitalize funds.
for 2017. As Bill says, these transactions will be the new
normal.
we’ve turned the corner on the point of a secondary being
a stigma.
DEC 2016/JAN 2017 | PERE
7
GUEST COMMENTARY | THE FUND MANAGER’S PERSPECTIVE
Keeping things personal
Sally Doyle-Linden, partner and chief financial officer of London-based private equity
real estate firm Clearbell Capital, believes GPs engaging with all its investors during
secondaries trades benefits all the parties involved
Sir Winston Churchill once opined
moved back to focusing solely on other matters and put this
that a pessimist sees difficulty in
to the back of our minds. But we decided to be proactive and
every opportunity, whereas an
maintained a level of communication with the investor and
optimist sees the opportunity
their brokers throughout. This allowed us to keep on top of
in every difficulty. As a GP, one
the process and plan our resources and approach effectively.
wouldn’t choose to have one’s
When buyers eventually emerged, the three names that
investors trading interests on the
were put to us by the broker were groups we knew, which
secondaries market. But having
certainly helped. That said, we didn’t want to put a foot
recently been through this, I would
wrong during this process and, having come through it,
argue that, provided it’s managed in
I would offer the following advice to GPs facing similar
the right way, it can be a positive experience that unlocks
circumstances:
new opportunities for the GP as well as the LP.
Firstly, treat prospective investors equally. When one or
At Clearbell, we have been through the process twice –
two prospective investors are more proactively engaged,
and on both occasions it involved the same investor, who
avoid falling into the trap of providing them with more
acquired and then subsequently sold dollar and sterling
insight and information. This should ensure that you
interests in our first fund.
maintain goodwill across the board. As part of this process,
On the latter occasion, the investor notified us of their
we decided to treat the prospective investors in a similar way
intention in October last year, when they were still at a
to our existing investors so they were kept updated on the
very early stage in the process. We
deals we worked on, for example.
“Were we to go through it
were naturally disappointed by the
Secondly, don’t allow existing
again, I’m optimistic that it
decision, particularly as we had built
investors to bear costs. There are a
would be an opportunity to
up strong working and personal
number of costs involved, including
relationships with them. As their only
open up new relationships”
legal and tax advice. It’s important
UK real estate investment, we found
to ensure that these are managed and
that they were particularly engaged and interested investors.
borne by the outgoing and incoming investors.
They would often travel the long distance to attend our
Thirdly, avoid altering fund structures. The incoming
annual general meetings and sent staff to spend time with
investor needs to step into the shoes of the outgoing investor.
our team.
We were clear that we would not go back to our existing
The investor had benefited from a string of distributions
investors and request their agreement to a change unless
and only missed the tail-end profits of the fund. It was made
absolutely necessary.
abundantly clear to us that they were happy with Clearbell
Finally, steer clear of the commercial. As the GP, your role
and the investment, but that the decision to sell had been
is to provide investors with a good service, but avoid getting
triggered by the combination of a change in global investment
caught up in negotiations about pricing. We were particularly
strategy and their brokers persuading them that a good price
careful on this count as we felt it could have been a minefield.
could be achieved for their stakes in five separate private
It is possible that the growing popularity of secondaries
equity funds. We were told that without the approach from
trading platforms could take the personal element out of
the broker, they would have held the investment to maturity.
this process over time. But our experience was far from an
As a first step, we agreed a non-disclosure agreement
impersonal one – it was steeped in relationships and trust
with the brokers who immediately began to consult us on
built up gradually over time. Were we to go through it again,
the investors they would approach. I should say that this
I’m optimistic that it would be an opportunity to open up
was a lengthy process which did not complete until June the
new relationships, and hopefully bid à la prochaine to old
following year. It would therefore have been easy to have
friends on cordial terms.
8
PERE | DEC 2016/JAN 2017
EXPERT COMMENTARY | PARTNERS GROUP
Dispensing with tradition
Full pricing in the ‘traditional’ secondaries market is leading global investment
manager Partners Group to take on more ‘non-traditional’ secondaries to
find compelling returns for its investors. By Thomas Duffell
Zug, Switzerland: home to Partners Group
R
eal estate markets in many parts of the world can be
considered to be nearing cyclical zeniths. As such,
many buyers within the real estate secondaries space
– which traditionally involves the acquisition of LP stakes in
property funds – are cautious.
“You really have to question in this point in the cycle, does
it make sense to pay close to par for funds that are close to
winding down?” says Marc Weiss, partner and head of the
private real estate secondaries and primaries business unit at
Partners Group.
The Zug, Switzerland-headquartered investment firm
amassed the largest pool of dedicated capital for real estate
secondaries when it closed on $1.95 billion for its Partners
Group Real Estate Secondary 2013 fund, almost double the
original $1 billion target, according to PERE data.
“There is plenty of opportunity in the market for
experienced secondaries investors, but you need to go off the
beaten track to find it. I think if you look at what is being
offered up by sellers in the ‘traditional’ secondaries market,
probably with the exception of the portfolios of CalPERS and
a handful of other similar sized investors, the overall pool of
what could be sold is getting smaller,” Weiss continues.
10
PERE | DEC 2016/JAN 2017
He adds that this is why there are not many new entrants
to the market on the one hand, and why the few new players
there are find it challenging to get access to investment
opportunities and deploy capital on the other hand.
“If you look at the traditional space you are going to find
opportunities mostly from public pension plans and probably
some endowments and foundations that are trying to wean
themselves off their pre-GFC funds – although they tend to be
acutely price sensitive. You have to think back to motivation:
if the seller is not very motivated to sell, what is the point of
them accepting anything that is not close to par?” says Weiss.
The opportunities of the past, such as banks and insurance
companies selling down their fund exposure due to regulatory
constraints, are not as readily available today: “There is still a
bit they have to part with on the private equity side, but when
it comes to real estate, a lot have already cleansed what they
wanted to sell. I think there will be far fewer opportunities
there than anywhere else.”
The story in the US and Europe is similar and the types
of secondaries sellers do not vary significantly in that they
are typically financial institutions, pension funds, and
endowments and foundations.
Yet, the challenging macroeconomic and geopolitical
situation in Europe is creating greater opportunities, says
Stefan Lempen, senior vice-president, co-head private real
estate secondaries at Partners Group. “What is helping us
is the political uncertainty in the UK surrounding Brexit. It
generally plays in our favor when there is a level of uncertainty
of money moving into or out of a market.”
Still, an increasing part of the seller universe is being made
up of property funds or funds of funds looking to lock in an
IRR, Lempen adds.
Weiss: going off
the beaten track for
opportunities
Neuenschwander:
concept becoming
more recognised
Lempen: no
easy secondaries
transactions anymore
Breaking with tradition
The challenge global secondaries specialists now face is
whether they can shift the focus from traditional secondaries
who they are coming from and how big they are, are beta
to ‘non-traditional’ secondaries. One type of non-traditional
trades. You buy an LP interest in a fund and you have access
transaction is a GP-led restructuring, with much of the
to whatever information is available to you, and I would argue
current market opportunity focused around more mature
that our business has better access than most in the industry,
vehicles approaching the end of their fund life.
but just the same it is a beta trade. You have all the same
With GP-led transactions, the goal is not only to acquire a
rights, but also limitations, as a limited partner and therefore
fund stake and become a new LP. It is also about being a longif you can’t make the money on the buy-side, you’ll never be
term partner to the GP. These transactions are more complex
successful. For beta trades, you have to price it right – if you
because they involve several parties: all the LPs, the GP and at
can’t price it right in that market environment you shouldn’t
least one secondaries buyer. Historically, they were associated
buy it,” says Weiss.
with GPs unable to raise money in the primary market and
He adds that high internal rate of returns can still be made
had a certain stigma attached to them, but not anymore.
on traditional secondaries as the more mature funds in
A lot of the deaflow on the non-traditional
market are generating a lot of cashflow. But,
side comes straight from the GPs, says
he says to make good multiples that capital
Weiss. “They are the ones in the situations
needs to be recycled to another mature
where they need to wind down these preportfolio. “Those focusing on traditional
Value Partners Group
crisis funds and still have a lot of assets
deals really have to bet on recycling capital
invested in real estate
where there remains the potential to create
or using quite a bit of leverage – and both of
secondaries in 2016…
value with some combination of more time
these strategies generate another layer of risk
and/or more capital, or the opportunities
to the investor.”
come from operating partners who are
Not that the move towards non-traditionals
…volume
of
which
under pressure to sell assets in JVs because
for Partners Group occurred overnight.
was in non-traditional
the fund managers with whom they are
Weiss says that since 2013, non-traditionals
investments
partnered with want to liquidate, but the
have become an increasing part of what
Source: Partners Group
operating partners have an infinite time
Partners Group does, last year representing
horizon.”
around 75 percent of its overall transaction
“An increasing amount of transactions in Europe consist of
volume, and he expects it to be the same this year too.
a counterparty that is not the investor, but the manager of the
“More recently, we have seen an increase in dealflow for
property fund trying to achieve full liquidation of the fund,”
non-traditional secondary transactions in the US and we
adds Lempen.
expect to do more on that front going forward. GPs and LPs
That is not to say Partners is moving completely away
are familiarizing themselves with this concept – it is still new
from the traditional space. Rather, Weiss says, the firm is
for many, but they see the benefit for everybody involved,”
just putting more emphasis on non-traditional opportunities
says Fabian Neuenschwander, senior vice-president, co-head
given where the real estate markets are currently, but will
private real estate secondaries at Partners Group.
keep doing traditional deals on behalf of its clients when
For instance, back in July, PERE reported that Partners
prices are right.
Group invested $265 million on behalf of its clients in a
“Our view is that traditional secondaries, regardless of
portfolio of seven retail, mixed-use and development property
$985m
79%
DEC 2016/JAN 2017 | PERE
11
EXPERT COMMENTARY | PARTNERS GROUP
Trophy room: Partners Group’s marquee secondaries deal in Asia saw it buy assets in Shanghai from investors exiting Trophy Property Development
assets in the US. The investment involved the restructuring
of an existing mature fund. The portfolio was part of a
2006-vintage program managed by Madison Marquette
and includes retail centers in California and North Carolina
totaling around one million square feet of lettable area, and
large-scale mixed-use waterfront development projects in
Washington DC and Asbury Park, New Jersey. Partners
Group will work with Madison Marquette to operate the
assets and complete renovation and development plans.
“Giving an LP liquidity at a late point in the fund life or
inviting them to participate in the potential upside from
a restructuring, as well as giving a GP the chance to create
further value, is also a much more interesting play for us,”
says Neuenschwander.
Nascent Asia
The rise of non-traditional secondaries is not restricted to
the more mature and liquid real estate markets, the US and
Europe.
“We see non-traditional secondary opportunities in Asia
becoming increasingly more interesting as more sellers
emerge and begin to consider potential sales. The uncertainty
created by both macroeconomic and market events in
the region have been an impetus for this activity. We have
investors that naturally want less exposure to Asia, causing
12
PERE | DEC 2016/JAN 2017
them to reassess their portfolio allocations to the region,’’
says Wataru Miura, vice-president, private real estate Asia at
Partners Group.
Partners Group’s marquee real estate secondaries deal in
Asia, as reported by PERE, was in 2014 when it purchased
the stakes of 31 exiting investors in Trophy Property
Development. Trophy was a $1 billion China-focused
property development program operated by Venator Real
Estate Capital Partners and the minority owner of five
development projects in China through a partnership with
Shui On Land, a Hong Kong Stock Exchange-listed real
estate developer.
Trophy was formed as a seven-year program by Winnington
Capital in 2007. But after a restructuring in September 2013,
Venator replaced Winnington as investment advisor to
Trophy’s general partner and initiated an asset swap with
Shui On Land. They exchanged Trophy’s minority stakes in
the five original projects for a majority stake in Taipingqiao
116, a 968,000-square-foot residential development located
in central Shanghai.
Over the course of the restructuring, the program’s
advisory board approved a two-year extension to the life of
the program to April 2017. To secure a short-term liquidity
window, a tender offer process was subsequently launched
to find a solution for investors seeking an exit from the
restructured program. Miura says: “Just given the fact that
we are seeing quite a few real estate funds coming to the end
of their fund terms, if these funds have assets that need a bit
more work or time, there is a natural propensity for GPs to
consider a discussion with us about a liquidity solution.”
Yet, despite there being some big opportunities, the
challenge in Asia is that real estate secondaries is still a
nascent strategy. The primary fund universe is relatively
small compared with other parts of the world, and a large
proportion of real estate is tied up in non-traditional fund or
open-ended structures catering to core investors.
Miura says: “Property in Asia is still predominantly viewed
as a store of wealth, so the market of sellers becomes even
smaller when you take that into consideration. And even for
the global players, the allocations to Asia are smaller and so
wholesale decisions get less attention.”
The same reasons that cause potential sellers to weigh up
whether to reduce their Asia positions are a potential cause
for concern for a secondaries buyer.
“If you look at some of the emerging markets where you
have a lot of currency risk, and you may not be able to hedge
or it is expensive to hedge, then you factor that into cashflows
and depreciation assumptions which naturally impact the
potential return premium for those assets,” says Miura.
Deal difficulty
These complex non-traditional deals are also still challenging
to explain even as the real estate world begins to get educated
on this opaque area of the marketplace.
“GPs are a little bit reluctant, but the concept is more and
more out there and it is becoming more accepted by both
the GP and LP community in the US. There are still a few
that are a little hesitant, but we have come a long way,” says
Neuenschwander.
Miura agrees and says there is still time that needs to
be spent talking to GPs and investors about the types of
secondary transaction that can be structured and for which
different reasons.
“There is no easy transaction anymore,” agrees Lempen,
who adds that one of the most difficult aspects of the nontraditional secondaries market is convincing the seller.
“Sellers have more options these days so don’t always need
the secondaries market. Sometimes they don’t want to sell
because they simply don’t know what to do with the money
next. That’s a state of the market that has not been apparent
before. Sellers are wary about making a decision one way or
another.”
Non-traditional deals are also complex, as the transfer
of property ownership as a result of a non-traditional
secondary usually triggers a refinancing of the existing debt
New horizons: real estate secondaries is still a
nascent strategy in Asia
arrangements. It might also involve a consolidation of the
existing ownership or capital structure through the buyout of
minority shareholders or repayment of expensive junior debt.
For example, when Partners Group purchased a real estate
portfolio of retail and office properties in Finland and Sweden
from Nordic property investment manager Niam on behalf
of its clients, PERE reported that Partners also negotiated the
refinancing of all existing debt facilities, as well as the buyout
of minority shareholders and joint venture partners and the
prepayment of a mezzanine facility incumbent in the capital
structure.
As such, there is a certain premium attached to these deals,
although it is not considerable, says Lempen. “I would say a
non-traditional secondary probably attracts an additional
multiple premium versus a traditional transaction, but that
is mainly due to the additional time and resources you have
to put into these transactions. I would say the average time it
takes to close a non-traditional deal is between three and six
months, while a traditional portfolio transaction could take
as little as three months.”
But, with many real estate markets reaching, or even
surpassing, peak pricing and a dearth of motivated
‘traditional’ LP sellers, the extra time it takes to secure a nontraditional secondaries deal is well worth the wait, agrees the
Partners Group team.
DEC 2016/JAN 2017 | PERE
13
ROUNDTABLE | SECONDARIES
From left: Ronald Dickerman, Eric Byrne Ken Wisdom and Dimme Lucassen
Challenges to momentum
Private real estate secondaries has grown exponentially as an institutional
marketplace in recent times. But next year could see a change say the
participants at PERE’s second annual secondaries roundtable. By Stuart Watson
Photography by Peter Searle
Sponsors: Portfolio Advisors and Madison Realty
Supporters:Aberdeen Asset Management and UBS
O
nce shunned, but now firmly established in the
real estate investment mainstream, the secondaries
market has built up a powerful momentum in its
own right.
At the beginning of the year, Connecticut-based sector
specialist Landmark Partners released figures showing
transactions in the global real estate secondaries market
totaled $8.2 billion in 2015, up 71 percent on the 2014 aggregate
of $4.8 billion.
If a further demonstration of the sector’s impetus was
needed, then November provided it in spades with the launch
of two new heavyweight secondaries funds. If it reaches its
$2 billion target, Landmark’s Landmark Real Estate Partners
VIII could be the biggest vehicle yet raised in the sector –
unless, perhaps, it is eclipsed by Partners Group Real Estate
Secondary 2017. The latter does not have a publicly stated
target, but Partners Group garnered $1.95 billion for its
predecessor.
But can that momentum be maintained? After all, the
14
PERE | DEC 2016/JAN 2017
primary real estate market faces headwinds and transaction
volumes are down. Is there sufficient demand among investors
for fundraisers in the secondaries space to meet their targets?
And, if they do, will there be enough deals to go around to
ensure their capital is invested? Some of the biggest secondaries
transactions of the past two years have been prompted by giant
institutional funds seeking to reduce the number of managers
they employ and the range of funds in which they invest. That
process must eventually run its course.
To delve into these issues PERE assembled a group of four
real estate professionals with expertise in the secondaries
market at its London office for its second annual secondaries
roundtable.
Two secondaries specialists from the US – Ronald
Dickerman, president of Madison International Realty, and
Kenneth Wisdom, managing director of Portfolio Advisors
– were complemented by two managers with broader remits,
but considerable experience in the secondaries sector: Eric
Byrne, head of global multi-manager and securities at UBS
Asset Management, and Dimme Lucassen, fund manager at
Aberdeen Asset Management.
One measure of how far the sub-sector has progressed
is the number of headlines it has begun to generate. Until
fairly recently, secondaries trades were commonly kept
quiet. They were frequently regarded as an outcome of
distress and stigmatized as an admission of underwriting
failures, a perception that was reinforced as investors felt
compelled to sell out of funds at a discount in the wake of
the global financial crash.
That stigma has largely vanished, argues Wisdom:
“Selling a fund interest is no longer viewed as a negative
reflection on you or your organization. Secondaries have
come onto the fairway as far as the ability of managers to
use them as a portfolio management tool is concerned. It is
much more common in the industry for investors to look
at their portfolios and say there are strategies that we want
to liquidate because we want to change direction or change
our allocation. Now, through secondaries, there is a proven
path to seek liquidity as long as there is a reasonable value
paid that fits their objectives. It is much more common now
than it was even five years ago.”
Aberdeen Asset Management’s Lucassen still detects
a trace of the former taint, however. “It has reduced. The
European market has been a little slower when it comes to
adopting that attitude, but we are getting there,” he says.
Lucassen: secondaries are slowing losing their stigma in Europe
closer to the real estate – so investing into the ownership
entity of the real estate itself,” he says.
“We tend to focus on direct properties and portfolios
where there are existing investors looking for exit strategies.
We also provide joint venture equity to prominent sponsors
looking to either sell down a piece or to recapitalize balance
An evolving sector
sheets, properties and portfolios.”
Early in the discussion, the participants attempt to pin
At its broadest any transaction that does not fit into the
down what the market means by a real estate secondary
“primary” category could be defined as a secondary trade,
today. Traditionally, such transactions were defined
he argues: “A primary transaction is a real estate transaction
by the transfer of a limited partner’s stake in a fund.
that is being bought and sold in the traditional primary
Some secondaries professionals would further limit that
market with likely a new capital stack, a new sponsor, and
definition by excluding interests in core funds. However,
a new business plan, which may involve stripping it back
such strict terminological
to the steel or turning it into
“Real estate private equity trading is
exactitude scarcely reflects
something else. Everything
where private equity trading was 10
the reality of a dynamic and
else falls into the definition of
rapidly developing sub-sector.
years ago. It is the perfect place to get secondary where property is
“The market has expanded your capital invested because it is really not for sale but some element
beyond that,” says Wisdom.
of the capital stack is being
opaque and it is not that crowded”
“There are deals such as
substituted or reshuffled or
Dimme Lucassen
recapitalizations that still
recapitalized.”
constitute the same type of underwriting and analysis but
Because definitions of what constitutes a secondary
take on a different structure. It is evolving over time, but
vary so widely it is difficult to pin down any universally
the bulk of the market in terms of transaction flow is still
recognized measurement of the size of the market. “No
that transfer of LP interests.”
one tracks the deals, so everybody makes as good a guess
Madison International specializes in non-traditional
as they can on volume. We spoke to [CRBE’s secondaries
secondaries. Dickerman terms them “direct secondaries.”
trading platform] Property Match in Europe and their
“Rather than buying an interest in a typical opportunity
view that the market globally was maybe $10 billion to $12
fund or value-add fund we are typically looking one level
billion. They say, ‘We have this much dealflow and we think
DEC 2016/JAN 2017 | PERE
15
ROUNDTABLE | SECONDARIES
Ronald Dickerman
President
Madison International Realty
Dickerman founded real estate
private equity firm Madison
in 2002. The company, which
has offices in New York, London and Frankfurt,
manages real estate assets of around $5 billion. It
focuses on capital partner replacements, equity
monetizations and recapitalizations of commercial
properties and portfolios, and also provides joint
venture equity to real estate owners and investors
in the US, UK and Western Europe.
Ken Wisdom
Managing director
Portfolio Advisors
Wisdom joined private equity,
credit and real estate firm
Portfolio Advisors in 2002 and
serves as lead member of the firm’s real estate
investment and advisory team. Portfolio Advisors
has $36 billion in assets under management.
Dimme Lucassen
Fund manager
Aberdeen Asset Management
Lucassen joined Aberdeen
four years ago as a fund
manager within its property
multi-manager team. The team comprises 20
professionals operating out of offices in Singapore,
Philadelphia, London and Stockholm, and
manages both primary and secondary real estate
investments.
Eric Byrne
Head of global multi-manager
and securities
UBS Asset Management
Byrne has worked for Swiss
Bank UBS for 20 years and was
appointed to lead its real estate multi-manager
platform three years ago. He was formerly chief
operating officer for real estate and has been a
member of the firm’s senior management team
since 2007. Byrne’s team manages around $7 billion
of assets, primarily for institutional investors.
16
PERE | DEC 2016/JAN 2017
Wisdom: ‘Secondaries have come onto the fairway as far as the ability of
managers to use them as a portfolio management tool is concerned’
we have X percent of the market, so this is our assessment,’”
says Lucassen.
Landmark Partners’ figure for 2015 is $8.2 billion.
Wisdom estimates it at around $11 billion. But by any
definition 2015 was a huge year for real estate secondaries.
Even a conservative estimate makes it the best ever year for
transactions. It also included the sector’s largest and most
talked about deal of all: the $3 billion sale of secondary fund
interests by the California Public Employees Retirement
System to Blackstone.
“There is a dynamic shift going on in the way investors
are allocating capital,” says Dickerman. “The thing I always
pick up on is investors are understaffed. They have too many
outside relationships with managers They might have 30 but
they want to have 10.”
As those investors rationalize their relationships with
managers, the fund positions they decide to liquidate are
sold into the secondary market.
But do last year’s figures represent a spike driven by
CalPERS and others rationalizing their portfolios? “It is
already proven now to have been that in a number of ways,”
says Wisdom. “If you look at the dealflow going back to 2014
it was about $4 billion. In 2015, we saw close to $11 billion
when you add in those billion dollar portfolios. This year is
projected to be closer to $4 billion again. Far fewer of those
large portfolios are trading.”
start, oil pricing is down, there is the geopolitical risk with
Brexit and the US election. If you have a secondary interest
the current value is marked on an historical perspective, but
the purchase price is based on the future, so if you have a
period of volatility changing your perspective going forward
you are going to see the bid/ask spread widening in pricing.”
UBS’s Byrne suggests that while investors in the US may
be wary of buying expensive property at the top of the
market, Asian money will continue to flood into real estate
funds. “It seems to vary by region. In the US, the core openended funds are now seeing redemptions for the first time in
five or six years, but that is investors taking some money off
the table in the core market to rebalance, reduce manager
relationships or move up the risk curve. Asia-Pacific and
Japan are just waking up to the possibilities of investing in
core real estate, so you have a huge wave of capital coming in
from China and Japan.”
Lucassen has a theory about the fall in transaction volume:
“I think the reason why volumes are down is because of
the lack of quality product being brought to the market.
Investors don’t want to sell because what are they going to
invest into if they sell?”
He argues real estate remains an attractive asset class in
the current climate, and one for which there is continued
strong demand. “If you look at the queues for the openended funds and the capital being raised for secondaries
strategies that drop in fundraising doesn’t come across. A
lot of people may find real estate conceptually expensive, but
there are many investors that are overweight in terms of their
bond portfolios and they want a real income stream to meet
their liabilities. That is going to bring a lot of capital into real
estate,” he says.
The pressure created by capital seeking a place in the
overcrowded core real estate market is helping to drive
demand for secondary positions in core funds from buyers
Market headwinds
Meanwhile, the real estate market as a whole is facing
headwinds. Some investors are calling the top of the market
and looking forward with trepidation to an imminent
downturn. R&A research predicts a 25 percent decline in
global fundraising this year, while JLL says investment
volume for the first nine months of 2016 was down 8 percent
at $454 billion, and the secondaries market is dependent on
primary transactions to fuel future activity.
Wisdom believes that uncertainty has already had an
impact in the secondaries market: “A large part of that decline
we have seen in dealflow is because of the volatility we have
seen in the marketplaces – capital markets got off to a slow
Dickerman: ‘There is a dynamic shift in the way
investors are allocating capital’
DEC 2016/JAN 2017 | PERE
17
ROUNDTABLE | SECONDARIES
Byrne: ‘There is a huge amount of interest coming from Asia looking for core real estate’
who would not previously have considered doing so through
such a route, suggests Byrne. “There is a huge amount of
interest coming from Asia looking for core real estate.
They want real estate in a low interest rate environment
and they want to get their money to work quickly. There
are also tactical investors who like one region or one sector
more than others and they are using the secondary market
core space to rebalance their portfolios,” he says.
The popularity of that strategy means that instead of
trading at a discount to net asset value secondary positions
have begun to trade at a premium of up to 5 percent, says
Byrne. “That helps deal with the perception in Europe
and Asia where they are less keen to sell in the secondary
market at a loss. If you are getting a genuine premium that
triggers more sellers to come into the market.”
Dickerman claims that an increasing number of
investors are becoming frustrated with the return
profile and operations of open-ended funds. “That is
something of a shot in the arm for the secondaries market.
18
PERE | DEC 2016/JAN 2017
Notwithstanding we are not investing in core assets like
a core fund, the idea is that there is absolutely a more
quantifiable and potentially lower risk profile for secondary
investing because you have an existing portfolio that is
fully specified, that is seasoned with an operating history
with the sponsor where you can do your due diligence on
their track record,” he says.
Deploying capital
Secondary investing is viewed by a growing number of
investors as a way to access the real estate market more
quickly and at a lower risk than investing directly in
property through the primary market, says Lucassen: “It
is the concept of investing into good quality real estate at a
discount while having better visibility and not having the
J-curve. The whole proposition for us is it is a risk-reducing
entry into real estate. You can do direct, but we would
argue that there are advantages to doing secondary and
that is something you should consider.”
Firms currently fundraising in the secondaries market
certainly believe that there is sufficient investor appetite for
the sector to fill their war-chests. Real estate secondaries is
still not a large market, however, and questions remain over
whether there are enough secondary positions available to
ensure that capital can be deployed.
When invited to choose the most significant secondaries
story published by PERE this year the participants
unanimously pick a headline about the increase in the total
volume of secondaries transactions last year (see box).
Wisdom explains why that is a key consideration. “The
primary issue is dealflow and access to dealflow,” says
Wisdom. “It is not a fluid market, so a lot of resources need
to be spent to build relationships over time and access deals.
Whether you can deploy the capital depends on whether
you have the dealflow because the hit rate is low.”
He estimates that for every 11 or 12 potential deals that
come across his desk only one leads to a transaction. That is
why few investors do secondary deals on their own, instead
buying into funds or working through intermediaries.
“Very few institutions are set up to do that because they are
managing a portfolio and they have other responsibilities.
Constantly underwriting to get a few deals done would
really take over their time and resources.”
A steady stream of potential transactions is vital to the
secondary market, but once the process of rationalization
among the big institutional investors is complete what
other market dynamics will generate the dealflow?
The participants identify investor fatigue as another major
driver of the secondary market sales. Dickerman explains:
“The converse of lower for longer is fatigue. Interest rates
have stayed low and the economy has been growing for
longer than people expected. You have investments that
were placed in service more than 10 years ago – funds that
have extended beyond their initial hold period because
managers are saying, ‘Wait a minute the economy is still
growing, interest rates are low and there is still value
growth. Why would I sell these assets?’ And underlying
investors are saying, ‘We invested 15 years ago. It was a
10-year vehicle and I already gave you an extension.’”
Such situations can lead to wholesale recapitalization of
a vehicle, but sometimes not all of the LPs in an ownership
structure want to move on. Byrne says: “I have seen a couple
of examples in the core and core-plus space where there is
a misalignment of investors – someone wants to leave for
repositioning or other reasons and someone wants to stay.
The biggest challenge then is about how you remove the
conflicts of interest about what price you come up with.”
Expanding their remit also helps secondaries funds
to maintain the supply of potential transactions. “What
A unanimous call
When asked to rank in order of
importance which secondaries stories
appearing on PERENews.com over the
last year were the most important,
all four roundtablers picked an article on
the growing volume of trades seen in
the market
Speaking volumes: the roundtablers on
what is headline news to them
Top story
Dickerman RE
secondaries
volume
jumps to
$8.2bn
Wisdom
Byrne
Lucassen
RE
secondaries
volume
jumps to
$8.2bn
RE
secondaries
volume
jumps to
$8.2bn
RE
secondaries
volume
jumps to
$8.2bn
Second
story
Third story
Blackstone
top overall
seconadries
firm also
investing
in RE
Old Mutual
acquires
Landmark
Landmark
owner
Religare exits
stake
CalSTRS in
talks with
Lazard for RE
sale
Pradera
investors
to explore
secondaries
sale
Composition
Capital
explores
secondaries
sale
CalSTRS in
Old Mutual
talks with
acquires
Lazard for RE Landmark
sale
DEC 2016/JAN 2017 | PERE
19
ROUNDTABLE | SECONDARIES
Go with the dealflow: real estate private equity trading is probably where private equity trading was 10 years ago, but expect it grow
you’ll see is a broadening of the definition with more direct
secondaries and more recapitalization instead of fund
transactions. That is the natural reaction to a contraction
in fund secondaries,” says Byrne.
Madison closed its latest vehicle, the $1.39 billion
Madison International Real Estate Liquidity Fund VI, in
July. Investors in the sector are usually prepared to give
secondaries specialists some “runway” in terms of the
style of transactions in order to generate returns in a tight
market, says Dickerman. “Most of these private equity
vehicles that we manage have multi-year investment
periods, so investors are willing to give us the opportunity
to be disciplined and to make decisions about when to
deploy,” he adds.
Lucassen reflects that it is easier to deploy capital within
the real estate secondaries space than it is in private
equity secondaries because of a lower level of competition.
“People get the capital deployed within the time frames
they agree. A lot of the questions come from people
familiar with private equity secondary trading where the
market is very different. When a portfolio gets traded of
interesting private equity secondary stakes you will get 20
to 25 bidders. For real estate private equity secondaries in
20
PERE | DEC 2016/JAN 2017
Europe there would typically be two or three. Real estate
private equity trading is where private equity trading
was 10 years ago. It is the perfect place to get your capital
invested because it’s really opaque and it is not that
crowded,” he argues.
There are also more fundamental forces at play that will
continue to drive the secondaries market in the long term,
suggests Dickerman: “We have all observed real estate
becoming a global asset class. In China, the Middle East,
Europe and the US you can sit down with any institution
and they will have a view about where real estate should or
does fall in their portfolio.
“Capital is flowing all over the world and on the other
hand markets are ebbing and flowing. We know real estate
is the ultimate local business and it is an illiquid asset class.
Secondaries are the natural way for investors to prune
their portfolio and make portfolio allocation decisions in
an illiquid asset class.”
The secondaries market is now a small, but important
component in the global real estate investment machine.
In the near term, the sector is unlikely to match the peak
seen in 2015, but fundraising continues apace and there
are indications that the deals will continue to flow.
SECONDARIES | TAXATION
Real estate’s greater burden
Tax ramifications should be a foremost consideration when approaching
private real estate secondaries trades, not least because these have extra
layers to consider than their private equity counterparts, writes Meghan Morris
T
he traditional private equity secondaries market
has relatively straightforward tax implications.
The market’s more niche relative, the private
real estate secondaries space, however, is layered with
added complication stemming from regulations in the
primary marketplace. Investors, therefore, must approach
this burgeoning sector expecting greater tax-related
administration.
Such administration is more salient for the buyer in
a private real estate secondaries trade, says Dan Kolb,
a partner at Boston-based law firm Ropes & Gray. “[The
seller] has been in that fund for however many years, so
presumably they’ve crossed that bridge in terms of the
taxes they expected up front,” he says. “Sometimes you
can do a secondary where you get to move all the pieces
around. But that’s unusual. Usually you’re buying into
the position and you’re buying into the way the deal was
structured for [the outgoing investor].”
In order to identify the relevant tax implications and then
the most helpful structuring tactics, investors – as they
relate to US funds – must first evaluate their own investor
classification. For international buyers, the categorization
of investor type determines the tax rate under a US law, the
Foreign Investment in Real Property Tax Act (FIRPTA),
which dictates income tax withholding on the disposition
of a US real estate asset.
“When you’re buying an interest from existing investor,
you as the buyer have to invest in the fund through
the access point of the original investor,” says Sarah
Schwarzschild, a principal at The Carlyle Group’s real
estate secondaries platform.
“That access point may or may not be the most attractive
from a tax perspective for you as the new buyer of that
interest. There may have been a tax-exempt investor that
went through a door that mitigates effectively connected
income, for example, but that’s not the right door for you
DEC 2016/JAN 2017 | PERE
21
SECONDARIES | TAXATION
Know the transaction
Kolb: investors must
carefully consider
options
Schwarzschild:
understand tax
classification
Criz: careful
structuring avoids
tax drag
to go through. We employ various structures to try to
alleviate the tax burden for our own investors.”
Some groups, such as sovereign wealth funds, are exempt
from FIRPTA, and a law signed last December could
widen the investor base for those institutions that can be
categorized as Qualified Foreign Pension Funds, although
whether it will is currently being clarified.
“They haven’t come out with any quality regulation
on those rules explaining who is or is not included. It’ll
take years…[but] it will bring money into the US,” says
Kolb.
After investors understand their tax code, they must next
evaluate the particular real estate secondaries deal at hand
for tax implications – and the earlier the better to avoid
wasting both the buyer and the seller’s time, cautions
Russell Gardner, the UK and Ireland real estate head for
advisory firm EY.
“There are certain situations when what was advertised
to that incoming investor and then the reality of what
they’re really being asked to buy into has a sufficiently
big gap that stops the transaction from happening,” says
Gardner. “If [the deal] is $100 million, you can afford to
spend some time diligencing and trying to get under the
skin of it. If it’s a $10 million, $20 million interest you’re
buying, sometimes the fixed cost of getting the comfort
level you want can be too much.”
Investors must consider the tax efficiency of the existing
fund stake, evaluating the effective tax rate with respect to
the underlying assets of the fund and any existing blockers
or other structures set up to facilitate tax efficiencies for
the original investor. In this stage, an incoming investor
in a US fund, or one with US investments, should also
be concerned about effectively connected income (ECI).
Under FIRPTA, gains from the sale of a US property
Taxing times
Tax codes globally are becoming more complex, and with a major political upset in the US
in November along with European elections in 2017, that is unlikely to change anytime soon
‘Uncertainty’ is the operating word for investors and their
accountants thinking through the future of taxes affecting
real estate secondaries transactions.
Following last month’s US presidential election, few
industry experts say they can forecast what direction
president-elect Donald Trump and a Republicancontrolled Congress will take the tax code. Globally, the
prospects of European elections, along with populist
sentiments throughout many countries, are also making
the future of taxes more unpredictable.
“The uncertainty of what you’re buying into has just
gone up a few notches,” EY’s Gardner says. “Even if you
get access to the tax advice and opinion that was put
in a few years ago and has been perfectly good to date
and will be good for the next two to three years, the level
of assurance you’re going to have is going to diminish
massively. The shifts in international tax reform are going
to make buying into existing global or multi-regional
22
PERE | DEC 2016/JAN 2017
funds that much more difficult for investors to properly
assess the risk on.”
Gardner notes two areas of coming change. Many
regions are exploring ways of limiting the tax deductibility
of leverage, which increases a fund’s tax, particularly
those heavily geared. The other is the use of tax treaties:
“Double tax treaties have been used and in some
instances their application stretched quite considerably
by a number of fund structures,” Gardner says.
Both the movement of tax within fund structures and
movement of cash out of vehicles will become more
challenging, he predicts. “We’re a long way away from
settling back down from a position of instability on any
of those things, but I think it’ll come. I think this phase, we
will pass through it, but it’s not a phase we’ll pass through
in the next six months. It might be in the next three to
five years where we have this perpetual uncertainty and
the uncertainty is real, it’s genuine.”
Make the right move: investors need to understand their tax code and the implications of the deal at hand
interest are taxed as ECI, which can necessitate filing tax
concerns and additional compliance requirements, says
Jesse Criz, a partner at law firm DLA Piper. Even with a tax
‘blocker’ in place to circumvent a given tax, if the previous
investor had a different classification under a US tax code,
the incoming investor could end up with up to a 55 percent
federal tax rate, and that would seriously challenge the
worth of a trade.
US investors looking to buy stakes in European funds,
on the other hand, should evaluate the vehicle’s underlying
assets to understand if they are investing in a pure-play
real estate fund, with expected taxes on passive income.
Gardner says some investors are surprised to find that
the fund includes real estate operating businesses subject
to active income taxes. Similarly, foreign investors
considering US funds should ask if the fund includes
REITs because, depending on investors’ classification, they
could be subject to a 30 percent withholding tax.
Structuring the transaction
After understanding the purpose of the fund, there are
several points of consideration for incoming investors
wishing to minimize tax drag. For any secondaries
transaction in the US, buyers can request the fund hold a
754 election, which allows the incoming investor to reflect
the valuation of a transaction at the point it is executed
rather than an historic moment in time. The exercise is
known as “stepping up.”
“If there’s built-in gain in the partnership, and thereby
the tax basis of the underlying assets of the partnership is
lower than the value, the purchasing investor can make the
754 election so that its respective inside basis equals what
the investor pays rather than taking a lower tax basis,” Criz
says. “If there’s a built-in loss and the value of the assets
has gone way down, then you’d presumably not want to
make a 754 election.”
He demonstrates this practice with a hypothetical:
If the value of the assets is $100 and the tax basis is $50,
and the buyer’s purchase price is $75 for the fund stake,
then it would likely make sense for the buyer to make a
754 election, which would step up the inside basis of the
buyer’s interest in the fund to $75, rather than $50, and
the $25 in built-in gain would be shifted to the existing
partners so that the new partner’s interest is based on the
difference between $100 and $75.
One US real estate secondaries-specific tax consideration
is the 1250 recapture gain, a part of the tax code that
addresses the recapture of accelerated depreciation, Criz
DEC 2016/JAN 2017 | PERE
23
SECONDARIES | TAXATION
says. A seller of the partnership interest generally avoids
recognizing unrecaptured 1250 gain on the sale of the
partnership interest, rather than the sale of the underlying
assets and the distribution of the proceeds, which would
pick up the depreciation recapture. A tax-savvy buyer may
ask for price adjustments or certain structure requests
depending on the magnitude of the recapture.
A tax consideration relevant to both sides of secondaries
transactions comes in the allocating of income between the
buyer and seller. Most transactions are allocated through
a means known as the “interim closing of the books,” in
which any gains or losses that occur prior to closing are
allocated to the seller, and anything for the portion of the
year post-closing is allocated to the buyer. The deal can
also be structured on a pro rata, per diem basis, in which
the gains or losses are allocated at year-end according to
the number of days in which the partnership interest was
owned by the buyer or seller during the year of sale. Criz
notes that the interim closing of the books is the more
popular choice for sellers to avoid responsibility for the
portion of the year in which they did not hold an interest.
Avoid last-minute panic
Warning signs: tax discussions need to start early if they are not to derail
the transaction
Alphabet soup
Foreigners to tax-land may struggle
to understand the language of
abbreviations and numbers. Here
is a quick guide to some common
terminology
FIRPTA: Foreign Investment in Real Property Tax Act,
a US tax act that affects foreign investors’ real estate
dispositions
QFPFs: qualified foreign pension funds, which are now
tax-exempt from some transactions under last year’s
FIRPTA changes
892 investor: non-US governmental investors, such as
sovereign wealth funds
ECI: effectively connected income, a tax on income
earned in the US by foreigners
24
PERE | DEC 2016/JAN 2017
No matter the individual structuring choices, EY’s Gardner
cautions that investors begin the tax discussion early. In
his experience, an investor may have deal discussions for
months before considering the tax implications, which
could derail a transaction.
“Most of the investors we’re talking about here are
relatively sophisticated, have significant amounts of
capital to deploy and yet invariably get excited about an
investment way ahead of any rational appraisal of things
like tax,” he says. “We’ve certainly seen situations where
an incoming investor’s confidence gets undermined
quickly when they ask the manager a question on tax and
the answer isn’t clearly articulated back, where you just
generate a bit of uncertainty, unnerving the investor when
the fund manager doesn’t really understand the tax issues
with the fund.”
To avoid this uncertainty, he recommends that fund
managers either maintain a data room or have a ‘mental
data room’ of tax positions to summarize the fund’s tax
standing easily. Investors, for their part, should start the
due diligence process early on, prepared with a checklist
that includes the aforementioned tax considerations.
“From experience, there feels to be more secondaries
trades happening,” he says. “It still feels much less practiced
than it should be to allow people to execute these trades in
an efficient way that doesn’t have those last-minute panic
attacks.”
GUEST COMMENTARY | THE CAPITAL ADVISOR’S PERSPECTIVE
Restructurings are more attractive
than some investors realize
The growing trend in secondaries trades via fund restructurings should be more
popular with investors, writes Ashley Marks, director at CAPRA Global Partners
Purchasing a portfolio of real estate
assets via acquiring fund units or
special purpose vehicles is not a new
concept, though it is one that seems to
be more prevalent over the past three
years as a proportion of the funds that
were (relatively easily) raised between
2006 to 2009 reach a fork in the road:
extend or wind up.
It is these expiries which are
increasingly creating opportunities for different types of buyers
that traditionally would not be competing against each other,
namely indirect buyers like pensions or insurers, secondaries
specialists and other fund managers.
A fund restructure can be defined as a major change in its
investor base, manager or terms, and there are typically up to
four groups involved: existing and new investor(s), the existing
fund manager and sometimes a replacement fund manager.
Incumbent investors in a fund can see a restructure as an
opportunity to exit quickly and efficiently (six months versus
two to three years for a typical wind-up), while new capital
often finds a fully seeded portfolio as an exciting prospect,
albeit one delivered in an uncommon process. Managers with
funds nearing expiry, however, view a restructure in different
ways. For some, it is an opportunity to retain the management
of the vehicle for several more years. For others, it is a method of
achieving the objectives of their investors.
Perhaps the ideal reason for a manager attempting a
restructure and to remain is because the assets may have moved
down the risk curve, from a more opportunistic strategy to
core, meaning the fund needs repositioning.
There are many other justifiable reasons why an incumbent
manager would pursue a restructure; not least that although
the manager may have been in place for the past seven years, it
might not employ the same individuals. These new individuals
may want to draw a line in the sand, essentially hitting the reset
button on the fund to ensure alignment with the investors.
The tightrope that a manager must walk when entertaining
a restructure typically revolves around balancing the interests
of their investors and their own. This is not always a simple
process, especially for smaller fund managers with few funds
under management (both in terms of assets under management
and total number of funds). Those with less to lose (for example
those with little difficulty in raising additional capital) will find
it easier to put their investors first.
However, investors are a little like elephants: they never
forget. Indeed, there are some cases where investors have sworn
to never recommit to a manager due to the way the manager
has approached its intent to retain control of assets, so selfpreservation can be a false economy. Managers who successfully
navigate conflicts of interests are often the ones that investors
will be more attracted to for the next fund.
Invariably, whether a restructure is attempted or completed,
the focus will center on pricing and the nature of the assets will
be central to this. The other highly relevant ingredient will be the
nature of the purchaser; be it a pension fund, a fund manager or
a private equity or secondaries market specialist. The investors
with typically the lowest cost of capital tend to be the ones least
equipped to underwrite a fund restructure.
I was fortunate to be involved with a German retail fund
restructure earlier this year. Despite several typically indirect
investors confirming their interest to recapitalize the fund and
retain the well-regarded manager, one by one they fell away
from the process. This was due to insufficient resources, a lack
of expertise and inflexible deal requirements.
Eventually, a fund manager saw the opportunity, packaged
the deal appropriately and leveraged their relationship with
one of their own pension fund clients to take over the entire
vehicle; both the equity and management. The deal happened
at a significant premium to the prevailing net asset value –
albeit lower than what the related agents were anticipating.
The existing investors were delighted to exit and at what they
considered to be an attractive price rather than waiting for
another two years as the manager sold assets one by one.
One important observation to take away from the experience
was that the investor and manager were underwriting the
opportunity at core-plus returns. The more opportunistic
secondaries market specialists and private equity fund
managers, on the other hand, were closer to opportunistic levels
and could not compete with the end purchaser due to their
lower cost of capital. It begged the question: why are there not
more investors pursuing this as an investment route to assets?
DEC 2016/JAN 2017 | PERE
25
RESEARCH | DATA ROOM
Secondaries snapshot
PERE’s research team takes a look at the state of the market
Fundraising for real estate secondaries funds,
2010-YTD 2016
4.0
6
Capital raised ($bn)
5
4
4
2.5
3
2.0
2
1.5
3
2
2
1.0
Capital raised:
$11.97bn
1
0.5
2.22
1.24
0.20
3.60
2.10
2.61
2010
2011
2012
2014
2015
YTD 2016
0
Global
Capital raised
Number of funds closed
1.0
3.5
0.39
0.0
0.44
0.01
0.34
Difference ($bn)
Capital raised ($bn)
0.5
0.23
3.0
1.5
1.0
0.5
0.0
Pan-Europe
Difference between capital raised and targeted
amounts, 2010-YTD 2016
4.0
2.0
Western Europe
North America
Capital raised for real estate secondaries funds
per region, 2010-YTD 2016
2.5
4% 3%
88%
1
0.0
5%
5
Number of funds closed
3.5
3.0
Proportion of capital raised for real estate
secondaries funds by region, 2010-YTD 2016
2.22
1.24
2010
2011
0.20
2012
Global
2.22
2.10
2.17
2014
2015
YTD 2016
Western Europe
North America
-0.5
North
America
Western
Europe
Global
PanEurope
-0.69
-1.0
-1.08
-1.5
-2.0
-2.5
-3.0
-2.79
Pan-Europe
Source: PERE
26
PERE | DEC 2016/JAN 2017
RESEARCH | CAPITAL WATCH
Funds in market
Secondaries funds for the private real estate sector are a niche area,
but 2016 saw a growing number reach final close, according to PERE research
Private equity real estate secondaries funds in market
Fund name
Manager
Head office
Target
size ($m)
Vintage
year
Region focus
Sector focus
Landmark Real Estate Partners VIII
Landmark Partners
United States
2,000.00
2016
Global
Diversified
Real Estate Debt and Secondaries Ky (REDS)
OP Property Management
Ltd.
Finland
159.48
2013
Global
Diversified
Lingerfelt Commonwealth Value Fund II
Lingerfield Commonwealth
Partners
United States
75.00
2015
North America
Retail; Industrial; Office;
Healthcare; Hospitality;
Multi Family / Residential
Partners Group Real Estate Secondary 2017
Partners Group
Switzerland
Undisclosed
2016
Global
Diversified
Strategic Partners Real Estate Special
Opportunities I
Blackstone Strategic Partners
United States
Undisclosed
2015
North America
Diversified
Growing in popularity: timeline of top 10 fund closes
2.0
($bn)
1.5
1.5
Partners Group Real Estate Secondary 2009
0.5
Madison International Real Estate Liquidity Fund IV
1.0
0.5
AIP Phoenix
Global
Real Estate
Secondaries
Fund II 2013
0.8
Madison
International
Real Estate
Liquidity
Fund V
0.7
Landmark Real Estate Fund VI
0.5
1.6
Landmark
Real Estate
Partners VII
1.9
Partners Group
Real Estate
Secondary 2013
1.0
Strategic
Partners
Real Estate
Fund VI
1.1
Madison
International Real
Estate Liquidity
Fund VI
0.5
Metropolitan Real
Estate Partners
Secondaries &
Co-Investments
Fund
Nov 16
Jul 16
Sept 16
May 16
Jan 16
Mar 16
Nov 15
Jul 15
Sept 15
May 15
Jan 15
Mar 15
Nov 14
Jul 14
Sept 14
May 14
Jan 14
Mar 14
Nov 13
Jul 13
Sept 13
May 13
Jan 13
Mar 13
Nov 12
Jul 12
Sept 12
May 12
Jan 12
Mar 12
Nov 11
Jul 11
Sept 11
May 11
Jan 11
Mar 11
Nov 10
1.0
Top 10 funds closed, 2010 - YTD 2016
Current
Date
Fund name
Fund manager
Head office
size ($m)
closed
Region focus
Fund sector
Partners Group Real Estate Secondary 2013
Partners Group
Switzerland
1,950.00
Sep 16
Global
Diversified
Landmark Real Estate Partners VII
Landmark Partners
United States
1,600.00
May 15
Global
Diversified
Partners Group Real Estate Secondary 2009
Partners Group
Switzerland
1,500.00
Nov 10
Global
Diversified
Madison International Real Estate Liquidity Fund VI
Madison International Realty
United States
1,120.26
Jul 16
Global
Diversified
Strategic Partners Real Estate Fund VI
Blackstone Strategic Partners
United States
1,047.73
Sep 16
Global
Diversified
Madison International Real Estate Liquidity Fund V
Madison International Realty
United States
825.00
Mar 14
Global
Diversified
Landmark Real Estate Fund VI
Landmark Partners
United States
718.00
Apr 11
Global
Diversified
Metropolitan Real Estate Partners Secondaries &
Co-Investments Fund
Metropolitan Real Estate Equity
Management
United States
550.00
Feb 16
Global
Diversified
Madison International Real Estate Liquidity Fund IV
Madison International Realty
United States
520.40
Feb 11
Global
Office
AIP Phoenix Global Real Estate Secondaries Fund II 2013
Morgan Stanley Alternative
Investment Partners (MS AIP)
United States
500.00
Feb 15
Global
Diversified
Source: PERE
DEC 2016/JAN 2017 | PERE
27
GUEST COMMENTARY | THE EDITOR’S PERSPECTIVE
The best is yet to come
Deal volume may be falling for the second year in a row, but innovative
transactions and a hostile takeover bid keep private equity secondaries
in the headlines, writes Adam Le, editor of Secondaries Investor
A quick look back at the stories
PERE’s sister publication Secondaries
Investor has covered in 2016 and one
thing’s clear: the secondaries market
continues to innovate and evolve.
During a year punctuated by
macroeconomic
volatility
and
political uncertainty, the buyer and
seller landscape has been evolving
to deal with increasing competition,
rising levels of leverage and high pricing, to name a few.
Deal volume for the first half fell to $12 billion, its lowest
since 2013, according to advisory firm Greenhill Cogent.
Estimates for full-year volume are between $30 billion and $35
billion. If accurate, this would mark the second year in a row
of declining trades.
Yet headwinds such as public market volatility, Brexit and
the US presidential election have failed to dampen secondaries
players’ spirits. Nowhere is this more evident than in private
equity, the largest asset class within the strategy, accounting
for 82 percent of deal volume in the first half, according to
advisory firm and placement agent Setter Capital.
One of the most captivating stories of the year was
HarbourVest Partners’ hostile £1 billion ($1.2 billion; €1.2
billion) takeover bid for SVG Capital, a London-listed private
equity vehicle. The deal dragged out over a nail-biting five
weeks as competitors including Goldman Sachs and Canada
Pension Plan Investment Board launched counter offers, and
ended in mid-October when SVG capitulated to Boston-based
HarbourVest’s offer to acquire the vehicle’s portfolio instead of
the management company.
Market participants heralded the deal as a new era in the
sector, with the head of European secondaries at one firm
likening the deal to the “corporate raider” transactions of Wall
Street.
Infrastructure secondaries have been making headlines,
too, such as Arcus Infrastructure Partners’ €800 million
tender offer on its 2007-vintage fund in March, and Ardian’s
sale of its AXA Infrastructure Fund II, a 2007-vintage €1.1
billion vehicle.
Excluding real estate, real assets secondaries such as
infrastructure, energy, timberland and agri, and metals and
28
PERE | DEC 2016/JAN 2017
mining exploration, show real promise, with players such as
HarbourVest logging around $11 billion in potential dealflow
in 2015.
The buyer and seller landscape has been evolving across all
asset classes, as a recent survey of limited partners globally by
sister publication Private Equity International found. Almost
a third of respondents said they plan to increase purchases
of fund stakes over the next 12 months, a sign the already
competitive secondaries market may become even more
crowded.
Buyers have become sellers, such as Partners Group’s sale
of an €800 million portfolio of tail-end private equity stakes
to Goldman Sachs, and sellers have become buyers, such as
Michigan Retirement System’s purchase of a $25 million stake
in Warburg Pincus Private Equity XII.
“People always had these [buyer or seller] labels,” says Phil
Tsai, global head of secondaries market advisory at UBS. “That
has increasingly become more and more blurred.”
So how does all this compare with activity in real estate
secondaries? For one thing, the buyer and seller labels there
have yet to blur, and the buyer universe remains limited to a
handful of dedicated players.
“Despite the relative attractiveness of the market, there
still aren’t a lot of new entrants into the space,” says Sarah
Schwarzschild, head of real estate secondaries at Metropolitan
Real Estate. Pension funds and sovereign wealth funds have
not built up dedicated real estate secondaries teams in the
same way they have in private equity because real estate is still
a specialised space, she adds.
As for complex deals such as fund restructurings, where
assets are moved into new vehicles with reset economics and
terms, at least five of these have closed this year, a sign players
in the space are applying the same tools as their private equity
counterparts, Schwarzschild says.
“The traditional [real estate] LP fund market is not going
anywhere and will always exist,” she says. “These other types
of asset secondaries deals, fund recaps, there’s a lot of buzz
around them and they will continue to be prevalent.”
With firms including Partners Group and Landmark
Partners back in market with dedicated real estate secondaries
vehicles this year, new entrants to the space will do well to get
ahead of the curve.
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• California Institute of Technology • CalPERS • CalSTRS • Cliffwater • Colorado Public Employees’ Retirement
Association • Conrad N. Hilton Foundation • Courtland Partners • Dasnac Holdings • Franklin Templeton • GIC
• Hamilton Lane • Ivanhoe Cambridge • The J. Paul Getty Trust • LACERA • Los Angeles Fire & Police Pension
System • New Mexico Educational Retirement Board • North Carolina Department of State • Office of the Oregon
State Treasurer • Oxford Financial Group • QIC Global Real Estate • Russell Investments • San Bernardino County
Employees’ Retirement Association • San Francisco Employees’ Retirement System • Spire Capital • Stanford
Management Company • State Board of Administration of Florida • StepStone • Teacher Retirement System of
Texas • Texas A&M University • Texas Education Agency • Texas Treasury Safekeeping Trust Company • University
of California Regents • University System of Maryland Foundation • UPS Investments • USAA Real Estate Company
Global Investor Forum: Los Angeles 2017
April 5-6 | Omni Hotel
Book your place
online: www.perenews.com/global-investor-los-angeles
email: [email protected]
phone: +1 212 633 1073
For more information on the Forum
Jennifer Russo
[email protected]
+1 646 619 8132
For more information about sponsoring
Tyler Mitchell
[email protected]
+1 646 795 3279
www.perenews.com/global-investor-los-angeles
The Global Leader in
Real Estate Secondary Advisory
Over
$24 billion
in real estate fund
commitments advised on
More than
500
The Numbers
Speak for
Themselves
real estate fund
interests sold
More than
80
1
institutional real estate
investors served, including
endowments, foundations,
pensions, financial institutions,
family offices and many others
true global leader
in real estate
secondary advisory
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