Doughty Hanson signals new strategy in Europe(2)

A hire by the pan-European investor could mean that Doughty Hanson wants to launch a core-plus, value added fund following its two opportunistic vehicles.

Doughty Hanson Real Estate has appointed Martin Brendel, former head of acquisitions at DEGI, as a principal to focus on value-added and core-plus cross border acquisitions.

Brendel, a German national who joined DEGI, Allianz’s real estate fund arm, in 2001, will be based at Doughty’s Frankfurt office and will work closely with head of real estate John Howard.

“He will focus on value-added and core-plus, cross-border investments across Europe which complement Doughty Hanson’s focus on opportunistic investments in the European real estate market,” the firm said in a statement.

Some city sources are interpreting the high profile appointment as a sign Doughty Hanson is considering the creation of a pan European fund core plus and value-added fund that would be different to the firm’s previous two European real estate vehicles.

Its first two funds have pursued purely opportunistic strategies. Doughty Hanson & Co Real Estate I acquired €4bn worth of assets and is expected to make a 4.4x return on cash investment when all distributions have been made and a gross annual internal rate of return of 43 percent. Its follow up fund closed in 2006 on €506 million and has so far invested just over 40 percent of equity.

There is currently a debate raging in Europe as to whether fund managers will respond to fears of a weakening global economy and the end to cap compression rates by launching higher risk, higher return unlisted opportunistic vehicles or whether there will be a preference for lower risk strategies.

According to a survey by Property Funds Research, more than half of 35 unlisted funds launched this year are value-added. A quarter are core or core-plus in nature while 17 percent are opportunistic.