Benson Elliot Capital Management
February 25, 2009 Throw out the bathwater, not the baby Guest Column

FT Commentary

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February 24, 2009 Benson Elliot appoints Philipp Braschel to direct German investment activities Benson Elliot Capital Management, the leading private equity real estate firm, announces the appointment of Philipp Braschel as Principal responsible for leading the company’s investment strategies in Germany.

Philipp was previously an Executive Director in Goldman Sachs’ Real Estate Principal Investment Area, managers of the c. $26 billion Whitehall Funds. Since joining Goldman Sachs in 2000, Philipp has managed transactions across Europe, including retail, office and residential investments, development fundings and the acquisition of non-performing loans. In recent years Philipp’s focus has been primarily on Germany, Austria and Switzerland.

To date, Benson Elliot has made a number of investments in Germany through its first fund, Benson Elliot Real Estate Partners II. These include the acquisition of Düsseldorf’s Deutsch-Japanisches Center, incorporating the well-known Nikko Hotel, and an investment in a performing mezzanine debt tranche secured by a portfolio of sixteen assets, including ten hotels.

Commenting, Trish Barrigan, Senior Partner at Benson Elliot, said: “Germany is a key market for Benson Elliot and, following the closing of our new fund, we anticipate extending our activities in the country. It was therefore a logical step for us to appoint a specialist with extensive experience, a proven skills set and a prominent market profile. Having spent almost ten years as a principal investor, with a particular emphasis on Germany, Philipp’s strong reputation and commercial edge will prove invaluable as we continue to build our presence and evolve our investment strategy in the region.”

Philipp Braschel added: “The German property market faces the same harsh retrenchment as other European markets, on the heels of a weakening economy, de-leveraging of the investment sector and a fall in asset prices. Investment opportunities will undoubtedly present themselves over the next few years, and, with a large pool of discretionary equity, Benson Elliot is perfectly positioned to exploit those opportunities.

“I am looking forward to working on a diverse range of transactions at Benson Elliot, and believe that, despite the economic gloom, the firm’s business model and outstanding team will hold it in good stead.”

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February 2, 2009 Benson Elliot raises over €500 million in accelerated fundraising Oversubscribed second fund to target distressed property assets amid extreme market turmoil.

Benson Elliot Capital Management (“Benson Elliot”), the leading European private equity real estate firm, announces that it has closed its second pan-European fund, Benson Elliot Real Estate Partners III (“BEREP III” or the “Fund”), with capital commitments of €505 million, against a target of €500 million.

BEREP III, which was marketed during the most turbulent period experienced in financial markets in decades, will invest in a broad range of performing and non-performing real estate assets across Europe. The firm’s ability, in the current environment, to create one of the largest independently managed private equity real estate funds, is a reflection of Benson Elliot’s pre-eminent reputation in the sector and the experience of its senior management in successfully navigating past market downturns.

The new fund will continue Benson Elliot’s proven real estate investment and asset management activities. Benson Elliot decided to cap BEREP III at a level approximately 50% larger than the company’s previous fund, Benson Elliot Real Estate Partners II (“BEREP II”), notwithstanding strong investor demand. The increased fund size for BEREP III is underpinned by the company’s enlarged professional team, and reflects the company’s expectation of substantial market opportunities during the investment period.

Subscribers to the Fund comprise institutional investors from Europe, North America and Asia, including corporate and public pension funds, endowments, foundations and family offices. Over 90% of Benson Elliot’s BEREP II investors have subscribed to BEREP III, an impressive achievement in an environment where many institutions find themselves at or above allocation targets for the property sector. Among the lead investors in BEREP III are Makena Capital Management, The State Teachers Retirement System of Ohio and UTIMCO.

To date BEREP II has invested circa €150 million, in six European countries, with approximately 70% of the capital invested in France and Germany. With the closing of BEREP III Benson Elliot has access to over €600 million of discretionary equity, and buying power of up to €2 billion.

Benson Elliot expects the ongoing disruptions in the global financial markets to create a steady flow of investment opportunities, as many investors seek to reduce their exposure to the property sector, waves of property debt reach maturity, and new debt remains scarce. In particular, investors who made investments late in the property bull market, often using excessive leverage, will come under increasing pressure to liquidate their positions.

Commenting, Marc Mogull, Managing Partner at Benson Elliot, said: “This tough fundraising environment favours firms like Benson Elliot, which have the capability and experience to take advantage of market upheaval. During the second half of 2008 virtually no private equity real estate funds were launched, due to the paralysis in the real estate sector and wider financial markets. We see our ability to organise, and indeed oversubscribe, BEREP III, with virtually all of our legacy investors participating, as a strong endorsement of our business and our continued investment discipline.

“After several years in which investors have had to forage in increasingly remote markets in search of higher returns, or take on risks in established markets that, in hindsight, may seem imprudent, the next few years will offer a once in a generation opportunity for savvy investors to buy great assets, in major markets like the UK and Germany, on sensible terms. Looking back on twenty five years in this business, I can only say this is an especially exciting time to have a strong platform, an experienced team, a supportive investor base and a sizeable pool of discretionary equity.

“There will be plenty of challenges and plenty of false dawns. Patience will be a virtue in this downturn, because there will be no shortage of opportunities and recovery won’t come quickly. Our approach is not vulture investing, it’s value investing. The key task is not to time the precise market bottom, but to make the right investments, at sensible prices, and to deploy the right strategies to see those investments through to the inevitable market recovery.”

Probitas Partners, a global alternative investment services and fund placement firm, served as BEREP III’s exclusive global placement agent. Legal advice was provided by Travers Smith and Proskauer Rose, and structuring advice was provided by Deloitte LLP.

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