Three real estate money managers are up for sale as their owners attempt to deleverage their balance sheets, sources say.
At least two major firms — AIG and Citigroup — are looking to sell their real estate investment businesses. Sources expect these deals would be straight sales, rather than manager buyouts.
Sources say that a third, Bank of America, is selling Merrill Lynch's real estate investment management business. Jackie Fitzgerald, Bank of America spokeswoman, would confirm only that the bank wants to transfer the general partnership interest in the $2.65 billion Merrill Lynch Asia Opportunity Fund, which closed in October 2008.
She declined to comment on whether Bank of America is exploring selling the general partnership interests in any of Merrill Lynch's other real estate funds.
Other firms are jettisoning business segments. For example, Morgan Stanley Real Estate has exited the direct separate account business, confirmed Alyson Barnes, Morgan Stanley spokeswoman. This means it is not seeking new business and has wound down some separate accounts, she said. She would not give the size of the separate account business.
The potential sales illustrate the damage the economic downturn has done to some of the nation's largest real estate investment managers. The business has turned from a revenue source, providing cross-selling opportunities, to an albatross on the parent companies' balance sheets.
American International Group Inc.'s decision to sell its $24.3 billion global real estate business follows the Sept. 5 announcement that the company sold an $88.7 billion portion of its investment management business — covering private equity, hedge funds of funds, equities and fixed income — to Bridge Partners LP for $500 million and a share of profits. In the meantime, AIG is continuing to manage the real estate business and explore options.
In January, AIG announced the business was up for sale but in August, it hired Robert G. Gifford as president and CEO for real estate. Sources say any deal to sell AIG's real estate business could include continued employment for the AIG unit's top executive as it did in the Bridge Partners transaction, in which Win J. Neuger will continue as CEO.
“AIG Global Real Estate continues to evaluate its options with respect to its fund management business,” said Lauren Day, AIG spokeswoman. Sources said AIG could do everything from selling the real estate business in one piece to selling off funds piecemeal.
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