Strong international interest in ING REIM

The possible sale of ING Real Estate Investment Management (ING REIM) as part of a restructuring following ING Group’s EUR 10 bn state bailout has seen a string of heavyweight investors circle the Dutch asset manager, the biggest in the world with assets under management of some EUR 67 bn.
AXA Real Estate has so far been the only player to openly express its interest, but a number of other big players are reportedly also in the running, according to sources close to the marketing process being managed by Morgan Stanley. Names being bandied about include Allianz, asset managers Pramerica and Henderson Global Investors, private equity firms Blackstone and KKR, Ameriprise Financial’s Threadneedle, TPG Capital, Blackrock Investment Management and China Investment Corp.

Prized portfolio
The strong interest is hardly surprising, given the size and quality of the ING REIM portfolio, which was valued at EUR 66.6 bn in March, of which assets under management in Europe account for around EUR 25 bn. The asset manager is also active in Asia, the US and Australia. US investors like Blackrock and Blackstone will no doubt be eyeing the American assets, which account for nearly 25% of the total portfolio. At the same time, they may also be interested in the European holdings, in line with the current strong US institutional interest in Europe.The Wall Street Journal has put the takeover price for ING REIM at no less than EUR 800 mln. Based on a pretax-profit of EUR 73 mln in 2009, that would mean 11 times the profit figure. Others suggest the price tag could even hit EUR 1 bn.

Strong growth
ING REIM has grown steadily in recent years through takeovers and the introduction of new funds. In the US it took over Clarion Partners, Trammel Crow and Gables Residential Trust, while in Asia it recently acquired New City Asia Opportunity Fund (2009) and Creed Real Estate Partners (2010). Five years ago ING REIM was already one of the world’s biggest property investors with assets under management of EUR 40 bn.

Split-up
Some sources suggest ING may have to split up the unit to conclude a sale, which the Dutch group hopes to complete by the end of the year. ‘The strong desire from the Dutch is to sell this in one go but the betting in the market is there’s no way they will hold this together,’ one source told news agency Reuters.
Strong growth
Snapshot Dutch portfolio
ING REIM’s Dutch portfolio consists of:
• 88 office buildings (including WTC Amsterdam)
• 195 retail stores and shopping centres (including Heuvel Galerie in Eindhoven and Mosae Forum in Maastricht)
• 11,000 rental apartments


Snapshots selected candidates
AXA Real Estate
For AXA Real Estate, which has AUM of EUR 38.2 bn, a takeover of the ING REIM portfolio would mean a considerable reinforcement of its position on the European real estate market. AXA’s focus is on Europe, but – like ING REIM – it has been active in Asia since 2006. AXA REIM has 500 staff spread across 13 offices in 21 countries. By comparison, ING REIM has 1,500 staff in 21 countries. AXA posted a profit of EUR 3.5 bn in 2009 and did not have to resort to major writedowns. The insurer is set to pad out its warchest in September when it sells a large portion of its UK life and pensions business to Resolution for EUR 3.3 bn. Speaking at last month’s Reuters Global Real Estate and Infrastructure Summit in London, AXA chief investment officer Dennis Lopez said AXA was ‘one of the few firms that actually has the infrastructure to be able to buy the company (ING REIM) and make it work’.

Blackstone Real Estate
Blackstone Real Estate, with AUM of $23.8 bn (EUR 19.4 bn), has been an active investor in offices, retail, residential and care assets through 10 global funds since 1992. The firm had EUR 9.3 bn in ready cash for real estate investments at end-March, so a takeover of ING REIM would not pose a problem from a financial point of view.

Blackrock
Blackrock had real estate AUM of $18.1 bn (EUR 14.8 bn) at end-2009. The value of this portfolio has fallen by 30% in the space of a year mainly due to property devaluations. Balckrock lost $114 mln on its real estate investments last year, prompting the question of whether its shareholders and management will want to increase the firm’s exposure to property.