Three high-profile directors of LaSalle’s European investment management operation have quit to set up their own firm
Bruce Bossom insists that the timing was coincidental, but last month’s news of the creation of Orion Capital Managers is bound to have raised a few eyebrows.
With the ink barely dry on the March merger between LaSalle Partners and Jones Lang Wootton, three of the top LaSalle Investment Management team in Europe have left to form their own fund management operation.
Van Stults, formerly head of LaSalle’s international operations in Chicago, and Aref Lahham, managing director of the firm’s Paris office, have teamed up with Bruce Bossom, former managing director of LaSalle Investment Management in the UK, to launch their own show.
“We felt there was a terrific opportunity for the three of us to work in a focused way as a team,” says Stults. The three had a combined 28 years with LaSalle Investment Management which, following the merger, has become a subsidiary of Jones Lang LaSalle, with $20.5bn of assets under management pooled from the former LaSalle and JLW operations.
The “terrific opportunity” they have identified will take the form of Orion European Real Estate Fund LP, which aims to raise $400m of institutional equity and acquire assets of more than $1bn.
Orion has received a healthy kick-start, with a $100m commitment from the US Travelers Insurance Co, which is part of Citigroup. The size of Travelers’ investment means the decision is a “major strategic initiative for Travelers and Citigroup to actively participate in the European real estate market,” according to Michael Watson, managing director of Travelers Investment Group.
“The structural changes occurring in the property industry are financially driven, and we felt that teaming up with Travelers was the best way to access that opportunity,” says Stults.
The Travelers sponsorship means Orion will effectively become Citigroup’s real estate equity investment operation in Europe. Stults describes the relationship between the two as being one of “cousins”.
Created last October by the merger between Citibank and Travelers, Citigroup has until now had only a limited involvement in European property, mainly through Salomon Smith Barney’s London office.
“The opportunity that we have with Orion demands total dedication and alignment of interests between the principals and the investors,” says Bossom.
The partners are putting what Stults calls a “significant portion of our own net worth” into the vehicle, which has been set up as a US limited partnership – a “very flexible and tax-transparent” structure.
Orion expects to attract investment from other US as well as European institutions. The fund will be euro-denominated and invest primarily in the eurozone. It has not ruled out the UK but will not look as far afield as central or eastern Europe.
The fund will be “performance driven” says Stults, refusing to pinpoint a target rate of return. A first closing is scheduled for the end of the year. The expected lifetime of the vehicle is eight years, with a “flexible” exit. “This is not an entity that has been structured for flotation,” he adds.
Orion is looking at three principal areas of investment.
The first is direct property investment, exploiting the wide gap between interest rates and property yields throughout Europe. By gearing up to 75% of total assets, Orion plans to invest in higher yielding offices and industrial property. The market is “fragmented”, says Lahham, but he expects to be looking initially in France and Spain.
Germany is another top target; the founding partners will be joined this month by Keith Fischer, previously with Citigroup in Frankfurt. The addition will give Orion a presence in four cities: London, Paris, Frankfurt and Chicago. Once the equity investors have been gathered in, Stults expects to return to Europe: he spent five years in London and Paris in the early 1990s.
The second principal area of business will be to invest in corporate property portfolios. These could be both operational and investment assets, says Lahham. “A lot of corporates are looking more closely at their real estate; as an investment vehicle, we can take it off their hands.”
The third area is private placements, providing capital to local developers around Europe, possibly with a view to financing them to an initial public offering.
“In all these areas, we can act across borders, with discretion, and with efficiency and speed,” says Lahham. “We are an entrepreneurial team that has been working together for seven years.”
And how does LaSalle Investment Management feel about losing that team, and presumably a potential client, Travelers?
Dan Cummings, co-chief executive officer of LaSalle Investment Management, is sanguine. “They found a sponsor where they thought they had a significant personal opportunity. It was something that came to them, that they felt they had to do on their own.”
LaSalle Investment Management has no immediate plans to set up a similar “wide, high-return opportunity fund”, adds Cummings.
Another JLL director describes the move by Bossom, Lahham and Stults as a “time of life” decision. The prospect of the merger may have precipitated the formation of Orion, but it didn’t initiate it.
