Sisterly advice

Investment & finance
The groups behind some of the largest real estate advisory companies are also successfully setting up investment management businesses. Their margins are not to be sneezed at and the know-how they can turn to can be invaluable

If you add together the assets that are currently under the management of CBRE Global Investors (CBRE GI), LaSalle Investment Management and Savills Investment Management, you will end up with the dizzying sum of USD 150 bln. More than half of this amount (USD 86 bln) is generated by CBRE GI’s portfolio, only slightly smaller than the world’s largest real estate fund manager, Blackstone, which currently holds USD 93 bln worth of assets.

Conflict ofinterest

However, unlike Blackstone, all three have emerged from companies specialised exclusively in the real estate market. They operate as wholly sovereign entities and look after their own businesses. They only retain limited relationships with their sister advisory companies. “Investment managers that operate under the brand of popular property agents are independent companies and the only thing they share with the agencies is their name. They operate as part of the same capital group, but they are independent businesses. And this is a good thing because there would be a conflict of interest between the manager and the consultant,” believes Michał Ćwikliński, the managing director in the investment consultancy department at Savills Polska. ‘Conflict of interest’ is the key term here. So rather unsurprisingly, everyone ‘Eurobuild CEE’ spoke to put a special emphasis upon it. “CBRE Global Investors is an independently operated affiliate of CBRE Group,” stated Martin Sabelko, the managing director of CBRE Global Investors CEE. “Both companies have policies to manage any potential conflicts of interest,” he told us. A similar state of affairs exists for LaSalle Investment Management.

Another benefit of the operational separation of individual companies involved in investment management is the fact that they do not need to go to their parent company’s consultants for advice. “There is no obstacle for such a manager in taking advantage of the consulting services provided by agencies outside their own capital group. And frankly this is what happens in the majority of cases. Nothing stands in the way of, for example, Savills cooperating with CBRE Global Investors or LaSalle Investment Management. Over the last three years, CBRE Global Investors has closed more transactions conducted in cooperation with Savills than with CBRE. Examples of such transactions include two Warsaw projects – Warsaw Distribution Center and Manhattan Office and Distribution Center – as well as Galeria Mazovia in Płock,” says Michał Ćwikliński.

Thirst for knowledge

However, it is sometimes hard to dismiss the insights of sister companies, so managers, as long as this does not raise suspicions about a conflict of interests, draw extensively on the intelligence and information gathered by affiliated consultancy companies. Furthermore, they regard this access as giving them a strong competitive advantage compared to firms not associated with any consulting companies. “This gives CBRE Global Investors a significant competitive edge, as the firm harnesses the research, market intelligence, investment sourcing, financing, leasing and property management of CBRE for the benefit of its investors. CBRE Global Investors is the largest dedicated real estate fund manager in Europe with USD 30.9 bln of assets under management. We have a track record going back more than 40 years. Our scale and our sole focus on property give us a real competitive advantage. Our clients benefit from our local on-the-ground teams in 14 offices in the EMEA region, which offers them real insight and expertise as well as a strong deal sourcing capability. We also have leading research capabilities to support our clients’ investment strategies,” boasts Martin Sabelko.

LaSalle Investment Management is also happy to turn to its consultancy affiliate. “LaSalle combines a strong research-driven offering with substantial in-market presence in key areas of the globe, including Central Europe,” says Christopher Zeuner, the head of Central Europe, LaSalle Investment Management. “We have an unrivalled global perspective in terms of meeting our clients’ needs. That global investment perspective is matched by our ability to successfully execute deals and manage real estate, and to be an early-mover in investment ideas and implementation,” he adds.

Direct access to market intelligence is certainly a significant asset. Especially since the demand for real estate management services is currently rather strong. According to Preqin, opportunistic closed funds had raised USD 47.7 bln globally this year by the end of Q3. This is the best result registered in the last seven years. Not all the funds are treated equally, though. New managers, which are only completing their first or second fund, find it more difficult to become successful. Investors definitely prefer brands with long-term experience and that have already proved their competences. “There is a great deal of interest in investment management services, mostly from investors who do not specialise in real estate. Investors need somebody to get involved in property acquisition on their behalf as well as active management at the later stage. The main sources of revenue for investment companies are management fees. These are subject to the property’s value, the amount of funds invested or the revenue,” explains Michał Ćwikliński.

Investment plans

At the moment the conditions for the development of investment management businesses are favourable and managers themselves are unabashed about their bullish moods and wolfish appetites. “Our firm seeks to be the global leader in the real estate investment management sector by offering a broad and deep investment platform that consistently delivers world-class investment results and exceptional client service,” declares Martin Sabelko of CBRE GI.

LaSalle Investment Management, which manages assets valued at USD 57.2 bln, is also sharpening its appetite. “LaSalle is solely focused on real estate and no other asset class. Europe is a key market for LaSalle, and Poland and Central Europe is an exciting area for us. Although our focus at the moment is on Poland and the Czech Republic, we are monitoring developments in other markets to see if there are opportunities that meet our clients’ needs. Central Europe is a relatively new market for LaSalle, but we believe this is an exciting region, and we are convinced that there are opportunities that will support the aims and strategies of our clients,” comments Christopher Zeuner.