Former Colony Capital executive Georges Asmar has established a new fund management business, LeadCrest Capital Partners, PERE has learned.
The new firm, which will be based in Paris, will target sale-and-leaseback opportunities across Europe, with a focus on €10 million-€50 million transactions in western and northern Europe. It intends to build a diversified portfolio comprising office, industrial, retail and special-purpose properties with triple-net leases of more than 10 years.
LeadCrest, which was launched earlier this year, will be led by Asmar as its founder and president. He was previously global head of net lease investments at Colony, where he oversaw more than $6.5 billion in transactions during his five-year-plus tenure at the firm. Prior to that, he worked for three years as a director at net lease real estate investment trust WP Carey.
Europe has an estimated $4 trillion of corporate-owned real estate – double the addressable market in the US, according to Asmar. “There [are] lots of products to buy, that’s what makes it very exciting for the investor,” he said. However, while as many as 42 institutional funds in the US are dedicated to the strategy, there is much less competition in Europe, where Asmar counts less than half a dozen rivals in the sale-and-leaseback space.
He also adds that investors can capitalize on two different types of credit arbitrage, where properties leased by companies with similar credit ratings can be acquired at higher yields and cheaper debt in Europe than the US, and in growth markets rather than more developed markets in Europe. “When you invest in a property and you rent it back for 15-25 years, it’s very much a credit play,” Asmar said.
LeadCrest currently has three full-time staff, including Pascal Leclerc, who will act as the firm’s chief operating officer. He was previously a managing director at Colony for four years. Additionally, the firm has an advisory board that will include Stuart Koenig, formerly senior partner and chief operating officer at Ares’ real estate business; a net lease expert, Reggie Winssinger, founder and chairman of real estate firm National Portfolio and former WP Carey board member; and a credit expert, Olivier Chatain, a professor at business school HEC Paris. The advisors will also invest alongside LeadCrest in transactions.
The firm intends to raise capital through an institutional closed-ended fund for its strategy from both US and European investors, targeting institutions such as pension funds, insurance companies and family offices. Potential investments in the pipeline include manufacturing plants, car dealerships and mail sorting facilities in its target markets.
One challenge with tackling the sale-and-leaseback market in Europe, however, is that corporations in the region are generally less familiar with the strategy than those in the US. “There’s a lot of education that needs to go into the market, as it’s not always something that CFOs are immediately aware of,” said Arvi Luoma, head of European investment at WP Carey. “Sale leaseback is not as developed a product in Europe.”
And while the US is one country, Europe is made up of multiple countries with different legal and tax systems. “From a bigger picture investing point of view, there’s quite a high level of complexity when approaching Europe,” Luoma said.
The level of competition in the European sale-and-leaseback space largely depends on the market, he added. “In markets that are very liquid, very large, there’s a lot of competition, but when you move out of that space, it really does diminish.”
Real estate managers that are pursuing sale-and-leaseback investments in Europe include New York-based alternative investment manager Angelo Gordon, which attracted nearly $200 million in its first close last month for AG Net Realty Fund IV after the predecessor vehicle amassed more than $1 billion in 2014. New York-based sale-and-leaseback firm LCN Capital Partners, meanwhile, launched its third European fund, LCN European Fund III, with a €500 million target in December, according to PERE data.