In the last two weeks, Canyon Capital Realty Advisors has lost three top executives, triggering key-man provisions giving investors the ability to take control of the manager's investment funds.
Canyon Capital founders “removed” co-founder, CEO and Chairman K. Robert “Bobby” Turner, according to a letter to investors. Daniel Millman, principal and Mr. Turner's second in command, quit shortly thereafter, along with Bari Sherman, general counsel.
“After extensive consideration regarding the future of the CCRA business and its leadership, we determined that it is in the best interests of CCRA and its clients to remove Bobby Turner as managing partner and to restructure the management of the business and strengthen the alignment of our real estate expertise within Canyon,” wrote co-founders Joshua S. Friedman and Mitchell R. Julis.
Sources say Mr. Turner, also a co-founder, wanted to start his own firm to do social impact investing and negotiations over his separation didn't go well. Parent firm Canyon Capital Advisors' $20 billion hedge fund business dwarfs its $3 billion real estate business, and Canyon Capital executives wanted to integrate the real estate business.
Two managing directors — Quincy Allen and Neville Rhone Jr. — left the real estate arm of hedge fund manager Canyon Capital Advisors earlier this year to launch their own real estate investment firm, Arc Capital Partners.
Efforts to reach Messrs. Turner and Millman and Ms. Sherman were unsuccessful. Mr. Allen did not return calls seeking comment.
Mr. Rhone, in an e-mail, said, “In a nutshell, we have nothing but positive things to say about Canyon and our experience here.”
The departures are prompting real estate clients to wonder whether the firm can effectively continue the investment strategies and returns they have come to expect, sources said.
CCRA's returns have held their own. For example, as of March 31, the Canyon-Johnson Urban Fund III had a net internal rate of return of 16.4% since its 2008 inception, according to Ricardo Duran, spokesman for the $175.9 billion California State Teachers' Retirement System, West Sacramento, in an e-mail. CalSTRS' real estate benchmark is the NCREIF Property Index, which posted a return of 10.5% for the year ended June 30.
Canyon Capital Realty Advisors' new leadership insists that very little will change and, in fact, there will be some improvements. Co-founders Messrs. Friedman and Julis will be co-chairmen. Principal Jonathan Roth, a 16-year veteran, was promoted to president. Mr. Roth will lead the investment management and asset management teams.
CCRA will be integrated into Canyon Capital's hedge fund business and have broader access to firm capital and investors, Mr. Roth said. Before Mr. Turner left, the situation “was more difficult. It was more of a siloed environment.”
Still, he acknowledged he has had a lot of explaining to do with stunned investors.