The $1.15bn merger will add third-party fund management strength to CBREi in Europe and Asia
Jean Lamothe of CB Richard Ellis Investors will head the firm’s UK business after the $1.15bn merger with the majority of ING’s real estate investment management business goes through later this year.
CB Richard Ellis has agreed to buy ING REIM’s European and Asian operations, as well as the US property securities business, Clarion Real Estate Securities (CRES), for $940m in cash. It will also acquire $55m of CRES co-investments and incur $150m of transaction costs.
As expected, the US Clarion private investment management business is to be bought by its management, with backing from US private equity firm Lightyear Capital.
The sale to CBREi is subject to regulatory approvals and is expected to be completed some time in the second half of this year. The resulting business will have $97.4bn of assets under management by value as at the end of last year.
Lamothe joined CBREi only last November with a remit to better integrate the European business, after previous head Thibault de Valence left in 2010.
After the merger, CBREi’s Jeremy Plummer, rather than ING’s Jean Meulenbelt, will be head of the global multi-manager division and CBRE’s Matt Khourie will continue to head the US and overall business.
From the ING side, Pieter Hendrikse, currently CEO of ING REIM Europe, will be in charge of the enlarged European business, while Richard Price will run the Asian arm and Ritson Ferguson the real estate securities business.
For CBREi, the motivation behind the deal is mainly to strengthen its offerings in continental Europe and Asia.
The European region has a strong UK separate accounts business, which has not yet penetrated the continent, and an expanding global multi- manager business, which started in the UK and Europe and is based in London.
Fund management weakness CBREi is weak in third-party fund management, but works from Paris with the US business on European acquisitions for the value-added Strategic Partners Value funds.
Last year it launched its first European core fund, Pan Euro-pean Core, managed by Rupert Everett. ING REIM also has a segregated accounts business in the UK, which manages six mandates and four funds and is run by Kevin Aitchison.
It is a force in continental Europe, with €14bn of mainly core and core-plus funds under management.
As at 31 December 2010, the ING assets under management that CBREi will acquire totalled almost $60bn, half of which is in Europe: $29.5bn in Europe; $5.1bn in Asia; $19.4bn in listed securities; and $5.8bn in global funds of funds.
CBREi’s total assets under management were $37.6bn at the end of 2010. It’s revenues are still a long way off their 2007 peak, but began to recover last year (see ‘Annual revenue’ chart, left).
More detailed decisions about the structure in the UK under Lamothe will not be taken until the deal is completed. Winning in a ‘people business’ Segregated accounts is a ‘people business’ and CBREi’s managed accounts business has never lost a client.
James Clifton-Brown, CBREi’s European chief investment officer, who looks after the clients, including the 26 UK segregated mandates, said: “I’d like to see us learn from each other and adopt the best processes and practice from both worlds.”
One head of a rival international fund manager said of the merger: “The clients of the fund management industry are not huge fans of change. But CBREi will be by a long way the dominant manager in this market and that can be very powerful.”
Announcing CBRE’s 2010 results this month, CEO Brett White said this market cycle had brought “once in a lifetime” opportunities, “first and foremost in investment management”.