Lehman Real Estate nears management buyout

One of the largest private equity real estate platforms in the world will become independent of its bankrupt parent company, sister news site PERE has learned.

Lehman Brothers Real Estate will be spun out in a management buyout led by the group’s global heads, Brett Bossung and Mark Newman.

Mark Walsh, the former head of Lehman’s global real estate group and a voting partner in all of Lehman’s private equity real estate funds, is also expected to play a role in the independent firm. During his 20-year career at Lehman Brothers, Walsh oversaw the origination of more than $300 billion of commercial real estate debt and equity transactions.

The buyout will involve the management entity of Lehman Brothers Real Estate, and will see the management of the opportunity real estate vehicles transfer to the newly independent GPs.

The spin-out will not include Lehman’s real estate mezzanine funds, which, according to industry sources, are being eyed by Los Angeles debt investment firm Pacific Coast Capital Partners (PCCP). PCCP was unavailable for comment at press time.

The bankrupt parent company, Lehman Brothers Holdings, will continue to hold a stake in the funds, but, along with the existing limited partners, it will be allowed to reduce its unfunded commitments “significantly”, people familiar with the matter said.

Lehman's former private equity platform was also spun out by mangement, in conjuction with South African billionaire Johann Rupert. Now called Trilantic Capital, the firm is led by Charlie Ayres alongside four fellow former Lehman partners, Danny James, Vittorio Pignatti, Joe Cohen and Javier Banon.

Lehman Brothers Real Estate is among the largest private equity real estate operations in the world. Over the past five years, Lehman Brothers has raised $9.35 billion in equity commitments for its three opportunistic funds, including $2.4 billion for Lehman Brothers Real Estate Partners II, which closed in 2005, and $3.2 billion for the follow-on Fund III, which closed in 2008 – just before the bank filed for bankruptcy in September.