Bigger pockets and better fit drive sales of debt fund businesses

Renshaw Bay is latest niche real estate fund firm to find bigger buyer

When Jon Rickerts, head of real estate finance at Renshaw Bay, came to agree GAM’s takeover of the business he part owns, there was only one topic at the front of his mind. “If you just viewed it as a financial transaction, then you’d only be looking at one piece of the puzzle. Cultural fit is the big one.

Rickerts: three things were critical for Renshaw Bay

“Three things were critical for us in terms of engaging with a partner: culture, operational capability and their distribution capacity,” he adds.

Asset manager Renshaw Bay agreed in August to sell its real estate finance business to the Swiss-based GAM. Rickert’s entire 10-strong real estate team will now move under the GAM umbrella, with the deal due to be completed in October.

The sale is the latest in a string of recent deals agreed by independent debt funds or credit advisory firms, taking advantage of the buoyant market to cash in or team up with bigger outfits in a drive to expand.

Mediobanca recently announced it was taking a 51% stake in Cairn Capital; last year Brookland Partners sold a 40% stake to alternative asset manager Omni Partners, and other independent real estate debt fund managers are said to be exploring sales.

GAM, which manages $130bn of assets and has a presence in 11 countries, is an order of magnitude larger than London-based Renshaw Bay, with its $1.2bn in committed capital for real estate from clients. Coupled with a reputation for letting its acquisitions ‘get on with it’, GAM is an obvious fit, says Rickerts.

The sale also resolves the uncertainty that has been hanging over Renshaw Bay since its founder, Bill Winters, took the
top job at international bank Standard Chartered earlier this year.

Swiss stock exchange-listed GAM says Renshaw Bay will “launch new strategies under the GAM brand, investing in senior and mezzanine debt backed by real estate in the UK and Continental Europe”.

“Enormously attractive” sector

GAM chief executive Alexander S. Friedman says: “The persistent low-yield environment makes private market real
estate investments enormously attractive. As an asset class, it is a prime area for active managers to excel – and one we have not offered to our clients in the past.”

For Cairn Capital, the extra firepower available from Mediobanca tipped the London-based asset manager into the Italian investment bank’s arms.

Mediobanca will acquire 51% of the London-based credit asset manager. The deal, expected to be completed by the end of the year, sees the exit of Royal Bank of Scotland, which backed the firm when it was founded in 2004.

The Italian bank’s announcement of the deal revealed that Cairn has produced €40m revenues on average over the past three years.

As part of the deal, Mediobanca will provide Cairn with seed capital to co-invest and expand its credit funds business, and to increase its distribution capacity.

“From a strategic perspective, the deal brings a pot of seed capital for us to put into new fund strategies and real estate is one of the core strategies,” Peter Hansell, head of Cairn’s property group, says.

“There’ is a big focus within Mediobanca on growing the alternative asset management business and Cairn will be a huge part of that.”

However, Renshaw Bay’s Rickerts maintains that no amount of money will make any marriage truly happy, if the fundamentals are not in place.

“If you get the culture piece of it right, the rest of it falls into line,” he says. “If you don’t get the culture right, you really have to question it