Chicago-based commercial real estate services giant Jones Lang LaSalle last month closed an acquisition in London to create the United Kingdom’s largest property agency.
Closer to home, Beverly Hills real estate investment services firm Kennedy Wilson Holdings Co. last week signaled a major expansion into Europe with its acquisition of the Bank of Ireland’s Real Estate Investment Management unit, which manages commercial real estate for the bank’s clients.
The connection?
“Large real estate firms are looking for investment opportunities all over the globe right now,” said Mike Desiato, vice president of real estate industry publisher ALM Real Estate Media Group. “And from a practical vantage point, the wide scope of legal questions and pitfalls of doing business internationally dictates that it is best to do this by acquisition and not by growing organically.”
The deal by Kennedy Wilson is its first purchase of a European business and will increase its assets under management by $2.3 billion to total $9.7 billion. Kennedy Wilson has until now invested mainly in the United States.
Chief Executive William McMorrow said the company had been looking for ways to get a piece of the distressed properties market in Europe, where banks were preparing to unload assets that had been significantly discounted. On advice from a business associate, he approached the Irish bank, which was writing down the value of troubled real estate assets by as much as 50 percent.
“I came away believing that there would be a real opportunity once everyone was ready to sell what they had,” he said.
Kennedy Wilson’s strategy since McMorrow and his management team acquired the company 22 years ago has been to build strong relationships with bankers through its services business, which includes leasing, auction sales and property management. Those relationships can enhance the prospect of acquiring distressed properties at attractive prices.
Among other boosts, the company entered a 2009 reverse merger into a special-purpose acquisition company that pumped $248 million into its coffers. Kennedy Wilson then set an ambitious three-year plan to invest $5 billion to $8 billion in real estate assets. Last year, it acquired more than $2 billion in U.S. and Japanese assets.
“Since 2007, there’s obviously been a lot of distress all over the globe,” McMorrow said.
The Irish banking industry is relatively small compared with other European countries, he noted, but with offices in both Dublin and London, the former Bank of Ireland unit and its local staff should enable Kennedy Wilson to quickly gain credibility in the region.
“The Irish banking industry is smaller than Wells Fargo Bank, but almost all the lending activity has been in real estate,” McMorrow said.
