NEWPORT BEACH, Calif. - Lend Lease Real Estate Investments Inc. and Henderson Investors have emerged as the top contenders for PMRealty Advisors, according to real estate industry experts.
PMRealty's parent, Pacific Life Insurance Co., Newport Beach, Calif., quietly put the private equity real estate investment management firm up for sale a few months ago. Putnam Lovell Securities, Inc., San Francisco, has been hired to manage the deal. Donald Putnam, chief executive officer at Putnam Lovell, did not return phone calls.
James McWalters, CEO at PMRealty, also in Newport Beach, said in a statement that after Pacific Life conducted a review of its operating units, it decided it would focus on its core business of insurance and insurance-related products and services. As a result, it will divest itself of PMRealty and search for an appropriate buyer.
One of the key criteria for a buyer is the continuation of the quality of services during and after the process is complete, Mr. McWalters said in the statement. He emphasized the firm was searching for a buyer that would keep the current management team and operating systems intact so the transition would be as seamless as possible. He would not disclose the asking price.
The firm, which was formed in 1984, manages $2.2 billion in core strategies for separate accounts.
Eager to boost assets
Industry sources said Chicago-based Henderson, which a few months ago lost out to Deutsche Asset Management in a bidding war to acquire RREEF, has the money and is eager to increase its asset base. Officials at Henderson did not return phone calls. Jonathan Miller, principal at Lend Lease, Atlanta, said the firm had no comment about whether it might be a suitor for PMRealty. As in the $440 million Deutsche-RREEF deal, everyone on the PMRealty management team must agree to the selection of a new owner for a deal to be completed.
Pension fund clients are taking a wait-and-see attitude.
"We were advised of the transition and will have to see whether there is a substantial difference under the new ownership," said Keith Bozarth, chief executive officer at the Orange County Employees Retirement System, Santa Ana, Calif. "It's too early at this point to know whether any action will be required." PMRealty manages $46 million in a core separate account for the $4.6 billion system, and another $53 million has been committed to the firm, but not yet invested, said Mr. Bozarth.
Automatically on watch
At the $12 billion Alaska State Pension Investment Board, Juneau, any firm undergoing manager changes is automatically placed on the watchlist, said John Jenks, chief investment officer. "PMRealty has been on the watchlist ever since they informed us of a pending sale at our February board meeting. We will determine whether they still fit in with us after a sale has been concluded," he added. PMRealty manages $300 million in a core separate account for the system. Mr. Jenks noted that "They have been keeping us in the loop."
And Laura Wallace, CIO at the Public Employees Retirement System of Nevada, Carson City, said: "We pay close attention when there is an ownership change. ... We're very optimistic that it will work out and be resolved in the next several weeks." PMRealty manages $260 million in a core separate account for the $13.4 billion system.
Randall Zisler, principal at Colliers Apogee, New York, which raises money for real estate funds, observed the sale might have been driven by the current economic climate. "Pension funds are maintaining their flows into real estate, but not accelerating them. With interest rates low, Pacific Life could have seen this as an opportune time to harvest and recycle capital. Also, the value of fees is probably as high as it's going to be, especially if you believe interest rates are going to be rising.
"A firm like PMRealty could attract many large money managers, because it gives them a way to add more assets."
