Updated with correction.
Now that the drama over when and to whom ING Group NV would sell its global real estate business is over, investors are waiting to see what happens in the next act.
In two highly anticipated transactions, the Amsterdam-based global bank and insurance company announced last week it is selling ING Clarion Partners, its U.S. direct real estate unit, to management and New York-based private equity firm Lightyear Capital LLC, while also selling three real estate subsidiaries to CB Richard Ellis Inc.
CBRE is buying Clarion Real Estate Securities, ING's U.S.-based listed real estate securities subsidiary, as well as its European and Asian direct real estate businesses. ING is also selling to CB Richard Ellis a portion of its co-investment in the real estate funds.
The deals are expected to close sometime early in the second half.
So far, investor reaction has been somewhat mixed.
Executives at the Oregon Investment Council, Tigard, which has a $500 million separate account with ING Clarion Partners and $100 million in ING Clarion's Lion Mexico fund, are keeping a close eye on the firm, spokesman James Sinks said in an interview. The investment council oversees assets managed by the state treasury, including the $56.7 billion Oregon Public Employees Retirement Fund. Salem. (Oregon also has $100 million committed to CB Richard Ellis Strategic Partners US. Value Fund 5.)
“We are always interested in organizational change. It is often more of a reason to re-evaluate a firm than is poor performance,” Mr. Sinks said.
William R. Atwood, executive director of the $10.3 billion Illinois State Board of Investment, Chicago, said: “For me, personally, I'm more comfortable with ING Clarion as a standalone than a division of a Dutch bank. I'm comfortable with them (Clarion Partners executives) under the status quo in the current situation.”
The Illinois board has a $500 million core real estate allocation to ING Clarion Partners. The board's other core manager is CB Richard Ellis, Mr. Atwood said, so an early rumor that CBRE might buy ING Clarion, leaving the board with a single core manager, “was disconcerting.”
Stephen J. Furnary, chairman and CEO of New York-based ING Clarion Partners, is pleased with the Lightyear deal.
“We don't have the distraction of being part of a larger organization. There are no integration issues,” Mr. Furnary said. “It's not only a relief, but (also) it is exciting.”
“We've moved from profit sharing to direct equity ownership,” Mr. Furnary said. He added that 10% of firm members will have ownership stakes in the firm, which has $22 billion under management.
The firm will take on its old name — Clarion Partners — and will emerge slimmer, looking a bit more like it did before Mr. Furnary and his partners sold it to ING in 1998. He said Clarion Partners will return to its roots and invest only in the Americas: U.S., Canada, Mexico and Brazil. Within two years, Clarion Partners will begin investing in other South American countries, he said.
Soon Clarion Partners will move to expand its investor base from its current defined benefit focus. Firm executives are launching a direct real estate investment trust vehicle designed to be part of asset-allocation or target-date funds in defined contribution plans, Mr. Furnary said. The vehicle will invest a small amount of assets in publicly traded real estate securities for daily liquidity. The firm also plans to launch a private real estate investment trust for individual investors.
Clarion Partners will not sever all ties with ING, which will distribute and market Clarion Partners' DC and retail vehicles. It also will continue to retain most of its co-investment in the Clarion funds.