NEWS ANALYSIS: Rear view liquidity

Jeff Giller has left Liquid Realty after four years as CIO. He hopes to build an investment business to take advantage of the real estate distress. PERE Magazine, November 2009.

When news broke in October that Jeff Giller was leaving the secondaries shop Liquid Realty Partners, the burning question on most people’s mind was – what will he do now?

Few have been able to get to the bottom of the question, with Giller telling peers he has no firm plans and is still considering a “number of options”.

However the former chief executive officer, who officially left San Francisco-based Liquid in mid-October, has shed some light on the issue to PERE, saying he hopes  to build an “investment business” to take advantage of the “exciting time” ahead.

“Beyond weighing ideas, I was unwilling to pursue new business concepts until I was outside of Liquid Realty,” he said in an emailed statement. “Although I am considering a number of options, and my plans are still in the formation stage, generally speaking, I intend to build an investment business where I can employ the more than two decades of experience I have gained as both a manager of and a limited partner in real estate private equity funds.” 
He argued that as the industry moves toward the bottom of a deep property trough, now was a “very exciting time to be forming capital to deploy into innovative structures”.

The West coast executive declined to comment on market speculation that he will join forces with Liquid’s ex-director of business development, Josh Cleveland, and director of acquisitions, Brendan MacDonald, who left the firm in late September.

Giller’s departure has certainly come as a blow to Liquid, which was in the early stages of marketing its latest secondaries fund, Liquid Realty Partners V, targeting $800 million. The fund, if successful, would be the largest private equity real estate secondaries fund ever raised.

However, Giller’s departure, which was first announced to LPs in August, has triggered a key-man clause in Liquid’s $572.3 million LRP Fund IV, according to other people familiar with the situation. The fund is substantially invested having closed in late 2007, but sources said LPs were unhappy for LRP IV to continue to make new investments knowing Giller, Cleveland and MacDonald were departing.

Once a key-man clause has been triggered, LPs typically have to approve whether a fund manager can continue to make new investments from a vehicle. Other people with knowledge of the situation added that it would be “highly unlikely” for Liquid LPs to agree to such a move, not least given the liquidity issues facing much of the investment community. A spokeswoman for Liquid declined to comment.

Founder and chief executive officer Scott Landress will take over much of Giller’s responsibilities, backed by existing members of the Liquid team. PERE was told that the transition was going smoothly, and that the firm had already interviewed for at least one new employee.

Liquid was founded in 2001 by Scott Landress and Mark Berman. Berman left in 2005 and set up WRB Capital Group, which operated for two years, targeting single-tenant triple-net lease properties. According to his LinkedIn profile, Berman is now managing partner of the multi-family office platform MB Family Advisors, managing the distressed credit fund of funds, MB Dislocation Opportunity Fund. Giller joined Liquid in 2005 as co-managing partner and chief investment officer.