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Legal & General, a UK treasury firm, one of Europe’s largest asset managers, has acquired real estate investors as part of a strategic push into the private market under Chief Executive Antonio Simès.
L&G, which manages £1.1tn on assets, has acquired a 75% stake in Proprium Capital Partners, a global real estate private equity group of $3.5 billion.
Under the terms of the transaction subject to regulatory approval, L&G will ultimately obtain 100% propolium. The value of the transaction has not been revealed.
The move is part of a broad strategic expansion into the private market following the restructuring of the FTSE 100 financial services business by SIMK, which L&G took on top job last year.
This comes after combining units with private market businesses, then poaching Eric Adler from US insurance company Prudential before leading the asset management division. The deal marks the first acquisition under Adler, which focuses on the growth of L&G asset managers and expands to the private market worldwide.
The UK-based Financial Services Group hopes to raise private market assets from around $500 billion to $85 billion, with a target of operating profit of £500 million to £600 million by 2028.
L&G’s latest acquisition highlights how traditional asset managers are trying to expand into the private market in search of higher returns.
Some of the world’s largest asset managers, including BlackRock, Franklin Templeton and Capital Group, are expanding into the private market through acquisitions and partnerships with specialized providers. Private asset funds may earn higher fees than open market products, but they put clients at new risk.
L&G will provide up to $300 million to support Proprium’s funds as part of the transaction. Proprium was spun from Morgan Stanley’s Real Estate Special Situation Team in 2013. That investment includes German A&O hostels and British pub group Admiral’s taverns.
Approximately 60% of Proprium’s investments are in Europe, and the group also exists in the Asia-Pacific region. L&G says both regions are growth areas.
L&G’s real estate assets reach around £220 billion, including large-scale regeneration projects, industrial assets and affordable housing. L&G also acquired stakes in US-based real estate investor Taurus last year. It seeks to expand its real estate business beyond the UK, where the majority of its assets are focused.
Adler said the deal will help expand L&G’s geographical presence and expand its investment offering.
Proprium co-management partners Tim Morris and Philipp Westermann said there is a “immense opportunity” to expand into global real estate. The transaction is expected to close at the end of the year.
As part of the agreement, Proprium’s management team will continue to operate independently and maintain the current leadership structure, team and investment process.
