North American might takes Brookfield to top of the table


US and Canadian giant tops fund managers table as market returns to growth, writes Jane Roberts

Real estate investment management is finally back to being a growth business again, both for the industry’s leviathans and the majority of respondents to Property Fund Research’s seventh annual managers survey.

Assets under management have been climbing past pre-global financial crisis levels for the past two years, with aggregate figures for the top 100 investment managers recovering to 2007 levels by 2010 and then increasing to €1.42trn by last December.

With values beginning to recover and investors returning to the asset class, nearly 75% of the managers who responded to the survey in each of the past two years increased their assets under management in 2012.

However, to emerge after three or four very tough years both profitable and in the best shape to take advantage of the market upturn is a challenge.

Property Funds Research’s survey this year attracted more than 140 responses, an impressive number but by no means the whole universe of real estate investment managers. There are those who say this number needs to halve and predict that the consolidation that continued through 2012 and 2013 has a considerable way to run
(see pp16-17).

This year there have been three big mergers: AREA Property Partners and MGPA each sold to very large US asset managers, while Henderson announced that it is establishing a strategic alliance with giant US pensions adviser TIAA- CREF, which is effectively a merger of European and Asian operations (see p16).

Next year, when that deal closes, the new TIAA Henderson Real Estate will be one of the top four property investment managers in the world. The pair’s assets under management in 2012 totalled €61.6bn, which would have put them fourth in this year’s table.

The trio at the top of the leader board, Brookfield Asset Management, followed by CBRE Global Investors and Blackstone, are unchanged from the previous year, have very different business models and all increased their assets under management.

Brookfield a sleeping giant in Europe

Relative to its other business, Brookfield remains something of a sleeping giant in Europe, but it is pre-eminent in Canada and the US, one of the largest asset managers in Australia and the biggest in South America.

CBRE GI has grown through merger and acquisition, following its transformational merger with ING REIM two years ago, while Blackstone, with its former investment bank competitors largely gone, is the industry’s peerless raiser of capital. The US group raised the largest-ever real estate fund this time last year, the $13.5bn global Blackstone Real Estate Partners VII, with 250 investors, and increased its assets under management by 24% compared to 2011.

Meanwhile, Morgan Stanley, once one of Blackstone’s global allocator rivals, has bumped down the rankings, from seventh, to 15th, to 18th.

CBRE GI is the top manager in Asia (excluding Australia) with €7.6bn of assets – a relatively small assets under management figure compared with US and European property markets and an indication of the growth there should be to come in Asia.

In this region, BlackRock could be the one to watch in the coming years, after its acquisition of MGPA, which is the fifth largest investor of Asian capital.

p10The top 20 companies manage more than €800bn, which is more than the other 120 put together (€639bn).

In Europe, AXA Real Estate has consolidated its top spot, taking a market-leading position in new areas such as real estate debt.

AXA tops separate accounts table


It is also the top manager in terms of discretionary accounts (see below). The one blot on its record is its German open-ended fund, which performed badly and is being liquidated.

As investors come back to property they have been asking for an expanded range f products: bespoke funds, joint ventures, club deals and sidecar deals.

Property Funds Research found that 62% of assets under management are still in funds of one kind or another, 22% in discretionary separate accounts and 16% is advisory capital. In fact, the evidence this year is that co-mingled funds are having a resurgence, partly on the back of gradually increasing appetite for risk. It may have been hard work, but a string of private equity real estate managers have held final closings, including Cerberus, Lone Star, Perella Weinberg and Starwood.