EUROPE NEWS ANALYSIS: ING sale comes down to the wire

As the deadline for bids on ING Real Estate Investment Management passes, a private equity firm and a REIT appear to be the primary suitors. PERE Magazine, December 2010/ January 2011 issue

By the end of November, interested parties needed to have placed firm bids for the whole of ING Real Estate Investment Management (REIM). Although there is no guarantee that bids have been sufficiently high enough to encourage a sale, it certainly appears that there has been interest in buying the whole platform, which at €64.4 billion of assets under management as at the end of 2009 is one of the largest real estate investment businesses in the world.

Officially, the Hague, Netherlands-based group says it is evaluating the position of ING REIM within the parent bank, and the bidding process is part of that. Nevertheless, numerous parties including affiliates of global property services firm Richard Ellis, LaSalle Investment Management and even Australia’s Macquarie Group – which bid to buy Citi Property Investors earlier this year – reportedly have expressed an interest. However, only two parties have been reported with more certainty as having made formal bids.

Vornado Realty Trust, the third largest REIT in the US, is no stranger to battles. In 2007, when The Blackstone Group made an audacious $39 billion bid for Equity Office Properties Trust, it was New York-based Vornado that stepped up as a competitor with a bid of its own.

In recent times, however, even Vornado has had to admit the going has been tough. Chief executive officer Michael Fascitelli said at a recent conference: “We’re going around the margins trying to find value.” Indeed, in October, it acquired a 9.9 percent stake in JC Penney, which operates 1,100 stores in the US. At the same time as being able to finance large deals through current facilities and the public markets, the REIT also is in the middle of raising a $1 billion opportunity fund. But because it doesn’t own holdings outside of the US, a bid for ING has been mooted by some as a break-up play.

The other firm consistently linked to ING REIM is Kohlberg Kravis Roberts. It has been one of the worst-kept secrets in private equity real estate that the New York-based global private equity firm wants to build a real estate management platform. After all, it approached Sonny Kalsi in 2008 when he was still global head of Morgan Stanley Real Estate. Buying ING would be a huge splash into the sector and a whole lot faster than the process of hiring a team, raising a fund and investing it. At the same time, there are not that many large deals in mainstream private equity to go after. KKR declined to comment.

Of course, there could well be other bids being entered for ING at press time. If ING is eventually sold off, it will be a monumental game-changer for the acquiring party.