Madison and Prudential create alternative real estate investment platform
New York-based Madison Capital Management, LLC has launched a joint venture with PREI to capitalise on non-traditional real estate investment opportunities.
Additionally, the joint venture will provide an avenue for PREI, the real estate investment management business of Newark, NJ-based Prudential Financial (PFI), to enter the hedge fund arena, thus expanding its traditional real estate investor base.
PREI, on behalf of PIM, the asset management business of PFI, and Madison, the alternative investment management firm specialising in distressed, real estate and special situations financial assets, are managing the joint venture.
The venture will be funded initially by a USD 31 million capital commitment by the joint venture partners.
The objective of the joint venture is to sponsor and manage a series of hedge and/or private equity funds focusing on fractionalized investment interests that are real estate-backed or -related. USD 26 million of the capital commitment will provide the initial investment capital to sponsor new funds and attract additional client capital, with the other USD 5 million dedicated to the development of new investment product areas.
The joint venture will enable Madison to leverage off of PREI's extensive global real estate research and underwriting expertise, transaction sourcing network, institutional investor contacts, and its significant presence in Europe and other global markets.
The venture's Board of Managers will consist of Bryan E. Gordon, Chairman and Managing Director of Madison, and two senior executives from PREI, Robert M. Falzon, Managing Director of PREI's Global Real Estate Private Equity group, and John S. Gregorits, Principal.
Bryan Gordon of Madison said: "Joining forces with PREI, which is one of the largest global real estate investment managers, is a great endorsement of the success Madison has achieved over the past eight years investing in partnership units, private REIT shares, bankruptcy claims, distressed/defaulted tax-exempt bonds, and other fractionalized, sub-institutional financial assets. The synergies to be gained through the combination of PREI's traditional real estate knowledge and network with Madison's expertise in the non-traditional segment of real estate investment will be immense. In addition, in mid-2003 Madison opened a European business development office in Paris to further develop relationships with potential investors and European transaction sourcing channels. I believe this joint venture with PREI, including the potential synergies available through PREI's purchase of TMW in 2003, will greatly enhance Madison's growth in Europe."
The partnership will provide PREI with a channel to access product lines beyond traditional real estate investments through this strategic alliance with Madison.
PIM, one of the largest institutional asset management platforms in the United States, together with PREI, a leading real estate asset management division with a global market presence, identified Madison as the foremost investment manager specializing in fractionalized, sub-institutional financial assets, an area it believes offers excellent investment and growth potential and a product area that, without Madison's proprietary operating platform and expertise, would be hard to access.
Rob Falzon of PREI said: "Over the years, we have been quite intrigued with Madison's unique investment focus and operating platform. Today, we are truly excited about the ability to create a whole new product line through this partnership with Madison. Madison has an operating infrastructure and knowledge of fractionalized investments that are unrivalled in the United States, and we very much look forward to partnering with them as part of our growing global platform in real estate investing."
Founded in 1996 by Bryan Gordon, Madison is a recognised leader in the United States in the direct acquisition of fractionalized distressed, real estate and special situations financial assets. The firm has offices in New York, Denver and Kansas City, and through Madison (Europe), in Paris. Utilising an event-driven and value-orientated investment approach, Madison has invested more than USD 250 million in capital.
PIM, one of the largest managers of institutional assets in the United States, which serves corporations, public funds, Taft-Hartley plans, insurance companies, foundations and endowments, had more than USD 310 billion in assets under management as of 31 March, 2004. PIM offers an array of products across the risk/return spectrum, covering a wide range of asset types.
In January 2004, PREI combined its United States and United Kingdom-based real estate private equity and merchant banking teams into the Global Real Estate Private Equity Group, in recognition of the increasingly global nature of PREI's initiatives in this area. The team has originated, arranged and invested about USD 1 billion in the United States and EUR 860 million in Europe in 20 transactions, including FountainGlen Properties, Lillibridge Health Trust, CRIC Capital, Heritage Property Investments and Red Stone in the United States, and Arlington Securities and Big Yellow in Europe. Global Real Estate Private Equity advises and co-invests with clients in high return real estate investment strategies.
PREI is comprised of fund management centers in Parsippany, New Jersey, Atlanta, Boston, London, Munich, and Singapore; supported by a network of local offices throughout the world. PREI's specialized operating units offer a broad range of investment opportunities and investment management services in the United States, Europe, Asia and Latin America. As of 31 March, 2004, PREI managed USD 21.7 billion of gross assets (USD 15.2 billion net) on behalf of more than 400 clients and is ranked among the largest real estate investment managers.
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