Posts Tagged ‘private equity’
Not all pension funds are equal. Just consider this list of the Top 10 largest pensions in America: all but two–IBM and General Motors–are public funds. We see a great disparity between the state and federal pensions and the majority of private (single- or combined-employer) pensions. This difference may account for levels of risk, whether we’re talking about an annual loss or all-out failure. However, though private pensions in the U.S. don’t draw from nearly as many salaries as their public counterparts, they do have one advantage over their larger peers: non-capital alternatives.
Take a look at this fascinating New York Times article published last weekend. It explore an unusual method by which cash-strapped companies pay into their employees’ pension funds: substituting capital with large amounts of whatever commodity the company owns, makes, or sells. As a result, some private pensions hold very unusual assets, such as:
- $92 million worth of cheese (40% of a dairy company’s inventory)
- Two million barrels of whiskey
- Obscure real assets like water rights in a desert, a slaughterhouse, and oil wells
- A brewery, tree farms, golf courses, spas
- and even a lien on an airport terminal
Value is value. Since employees and fund managers are ultimately interested in steady returns, it may not matter how conventional an investment may be. If a well-aged cheese or whiskey fetches a nice profit a year or two from now, that’s what counts. Read the rest of this entry »
Week in Review for April 13 – 19:
- Twenty closed-end private equity real estate funds hold final closes in Q1, and CoStar reports the funds collectively raked in $5.2 billion. While Q1′s total far surpasses that of the previous quarter, the private equity real estate sector faces more challenges than it did before the recession. Average fundraising periods at the start of 2013 are roughly double the averages reported in 2007, writes Mark Heschmeyer.
- In Georgetown, Kentucky, the American division of the world’s largest auto maker, Toyota (NYSE: TM), plans to expand its U.S. manufacturing to include Lexus sedans. This expansion is a positive sign for those working in heavy industrial real estate and gives an employment boost to the area. Still, it presents another reminder of Detroit’s waning dominance in American automotive manufacturing and consequences for its industrial real estate.
- Overseas Union Enterprise announces its intention of listing its hospitality real estate assets as a REIT on the Singapore Stock Exchange. OUE focuses on CRE opportunities in the U.S., China, and Singapore, reports the Wall Street Journal.
- In Philadelphia, competition for the city’s second casino license intensifies as six potential developers, ranging from local partnerships to the publicly traded Wynn Resorts (NASDAQ: WYNN) present their plans to the Pennsylvania Gaming Control Board. Read the rest of this entry »
Week in Review for March 9 – 15:
- Writing for The Atlantic Cities, Eric Jaffe discusses the cultural, demographic, and economic conditions reshaping American communities and real estate–and potentially diminishing the role of the suburb.
- Three Philadelphia brokers form a new boutique brokerage firm, Rittenhouse Realty Advisors, which will focus on sales and advisory services in the multifamily sector. Two of the firm’s founders are former members of Marcus & Millichap.
- Los Angeles REIT Kilroy Realty Corp. (NYSE: KRC) resumes its redevelopment of Columbia Square in Hollywood, reports the Wall Street Journal. The REIT acquired the enormous office building last year for $65 million and plans to convert the property into a mixed-use building, including residential, office, and retail spaces.
- Also on the West Coast, investment groups from China and Singapore commit greater amounts of capital to trophy properties in San Francisco, reports CoStar Group.
- In Buckhead, Georgia, Tishman Speyer returns the distressed One Alliance Center to special servicer Orix Capital. The 22-story office tower was constructed at the height of the real estate boom, but fell into distress in 2010 and has suffered from high vacancy ever since. Read the rest of this entry »
For a while now, we’ve been seeing increased public interest in commercial real estate investment–for a variety of reasons. Record-low interest rates, stock market volatility, and the relative stability and returns of CRE assets have drawn greater and greater amounts of capital from every branch of the investment world. Previously, I have discussed the increased real estate allocations of private equity groups, pension funds, and other alternative investors. Last Tuesday, we looked at legislation that will create new real estate investment opportunities for individuals by broadening the definition of what an “accredited investor” is.
Now–showing up a little late to the party, perhaps–we have hedge funds.
For the record, this discussion of hedge fund investment in commercial real estate isn’t simply an excuse to do a “hedge” pun, much less a Sonic the Hedgehog tie-in.
Well, okay. It kind of started out that way.
Collectively holding hundreds of billions in investment dollars, hedge funds are better-positioned than most to invest in this capital-intensive sector. In today’s climate of low interest, low yield, and generally sluggish economic recovery, hedge funds have been among the droves of investors seeking higher yields through CRE holdings. One particularly attractive asset among some hedge funds is the junior class of commercial mortgage-backed securities.
Bloomberg’s Sarah Mulholland and Kelly Bit write,
Ellington Management Group LLC, Saba Capital Management LP and a fund of MatlinPatterson are among investors considering purchases of so-called B-pieces of newly issued commercial property bonds, according to people familiar with the three firms’ plans…
The pool of buyers is poised to widen as new issuance soars and investors try to ferret out ways to get high-yielding returns as the Federal Reserve holds interest rates close to zero into a fifth year.
What happens in Vegas, stays in Vegas.
Or so they say. The “What Happens in Vegas” motto, a creation of the Las Vegas Convention and Visitors Authority, has proven one of the more culturally significant commercial slogans of recent years (it’s up there, in terms of popularity, with “Got Milk?” and “I Just Saved a Bunch of Money on My Car Insurance…”). Vegas’s slogan has spawned a movie and countless parodies, not to mention successfully rebranding the casino town from its family-friendly 90s incarnation to an image that better suits it–the sort of Sin City that inspired The Hangover.
Unfortunately, a big part of what happens in Vegas–construction jobs, economic growth, gambling and tourism revenue–has not been staying in Vegas.
Noun, informal. A decent, upright, mature and responsible person.
Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.
Douglas Kinney, Carlyle Group
Carlyle Group (NASDAQ: CG)’s newest hire is our Mensch of the Week. Douglas Kinney, a former executive with Greenhill & Co. (NYSE: GHC), has joined the Washington, D.C.-based alternative asset firm as its managing director for international real estate fundraising. Carlyle Group is an enormous fund manager, with assets reportedly in excess of $150 billion, so the fact that this extremely powerful firm (whose previous employees include numerous world leaders) is strengthening its real estate fundraising team is excellent news for the global real estate industry.
As PERE News reports:
The move is seen as a successful stroke for Carlyle’s investor relations team, which expanded in the run-up to the firm’s initial public offering in May and in the wake of raising $2.3 billion for the firm’s sixth US real estate fund, Carlyle Realty Partners VI, in December. According to two people familiar with the matter, Carlyle is expected to launch an Asia-focused real estate fund in the very near future and possibly another US vehicle. Read the rest of this entry »
10. Morgan Stanley (Amount under management, in billions: $56.4)
9. RREEF Alternatives ($57.4)
8. UBS Global Asset Management ($60.0)
7. Bridgewater Associates ($76.1)
6. BlackRock ($77.3)
5. Goldman Sachs ($78.0)
4. Brookfield Asset Management ($84.3) Read the rest of this entry »
As I’ve said time and again, investors like stability. Those deploying capital into commercial real estate want assurance that their investments aren’t overexposed to uncertainties. This is why the U.S., economic doldrums not withstanding, remains a favorite for international investors. That prevailing caution is also why investors avoid entire parts of the world when considering potential property investments.
The economic potential of the Middle East is seldom discussed in the West. Obviously, its many opportunities are quickly overshadowed by more dramatic news. The atrocities in Syria and political turbulence are grabbing all the headlines. But keep in mind the Arabian Peninsula is a huge place; we Westerners would be smart to view the region as more than simply a horrifying image on CNN. Read the rest of this entry »