Inside The £800M Takeover Of A Fund Management Grandmaster

In April, Keppel Corp. CEO Loh Chin Hua got in touch with Aermont Capital Chairman Léon Bressler for a friendly chat. The Singaporean conglomerate was looking to expand into European property, and Keppel's leader wanted to know what Bressler, one of the grandees of the sector, thought.

A couple of video calls later, the conversation got more serious. Loh and Keppel Chief Investment Officer Christina Tan flew to London and met Bressler and his partners. That's how, with no formal process, an £800M deal for Keppel to buy one of the most successful European real estate private equity firms of the past two decades was completed last week. 

“This was really what they call an ‘off-market’ between two partners that came together and said, ‘Hey, I think we can do something special here together,’” Loh said on an analyst conference call last week. 

The call gave deep insight into the strategy for the combined businesses, including plans for new data centre and debt funds, how Aermont plans to invest during the downturn, the fund performance figures that have made it such an attractive takeover target and how the profits on future deals will be shared. 

Aermont was set up in 2007 by Bressler, former CEO of Unibail, and has assets under management of £14B. Earlier this year, Bressler stepped upstairs, into the role of chairman, and former Norges Bank and Merrill Lynch executive Paul Golding moved from partner to managing partner. The firm has 40 staff. 

The company has built a track record buying traditional real estate assets, improving them and selling them at a profit. It has also become known for building up businesses that combine real estate with a large operational element, such as Amsterdam-based student and co-living platform the Student Hotel and — most famously and profitably — UK film studio company Pinewood Studios.

Loh said on the call that the plan is to increase Aermont’s AUM to about £35B by 2030 by raising new opportunity funds as well as sector-specific funds, debt funds and REITs. On the sector-specific funds side, data centres were mentioned several times. Data centres are an area in which Keppel has expertise and where significant growth in investor interest is expected. 

Golding said Aermont had already been in talks with some of its investors about a debt fund, which could be an attractive opportunity given the drawback in bank lending. New fund launches will only come once the deal completes in the first half of next year. 

Aermont raised €3.8B (£3.25B) for its fifth opportunity fund in March 2022, but Bressler revealed that the fund had only made one investment so far when it bought into an Italian luxury hospitality platform. Bressler said it views that as a growth investment because it intends to build out a “substantial platform” there and views this as the first deal of many. 

“We are also an extremely disciplined investor,” he said, adding that the firm had about £3.7B of equity to invest from its current funds, which would give it about £7.4B of investment capacity when combined with debt.

“Fund V is the best example of that because it is like Fund I in 2007, at the beginning of the real estate crisis. We decided not to invest and we generated superb returns for Fund I. The same thing for Fund V,” he said.

Bressler said Aermont’s first fund generated a net internal rate of return of 15% while other funds raised at the top of the last cycle lost money. 

Fund II has a project net IRR of 13% and an equity multiple of 1.9x, and Fund III has a 32% net IRR. The success of the latter fund is due to Aermont’s investment in Pinewood, the listed film studio owner it took private for £326M in 2016, where franchises like James Bond and Star Wars are filmed. Aermont raised £3B of new equity in November 2022 to recapitalise and expand the business. 

Aermont has shifted Pinewood’s strategy from leasing out studio space on a short-term, production-by-production basis to leasing big chunks of space to streaming companies like Netflix, Disney and Amazon on long leases, Golding said. It is also building millions of square feet of new space.

The next phase of the plan is to grow internationally. The investment has made a 10x return, Golding said. 

Keppel’s acquisition of Aermont will come in two phases. The purchase of a 50% stake for a maximum value of £306M is expected to close in the first half of next year, and the purchase of the other 50% stake for a maximum value of £493M will close in 2028. The size of the payments will be based on Aermont’s financial performance. The price paid represents a multiple of 13 times earnings before interest, tax, depreciation and amortisation, Loh said. 

In existing funds, the carried interest based on fund performance will be retained by Aermont’s partners and investment team. For the single-asset fund that owns Pinewood, Keppel will receive 20% of the carried interest. For future funds raised once the two firms are partners, Keppel will receive 30% of the carried interest, with Aermont staff retaining 70%. 

Loh said the deal gives Keppel the chance to become a global real estate player. The firm bought a London office building in the 2000s but never built scale, investing only in data centres and renewable energy in Europe.

That is about to change. 

“We share the same values,” Loh said. “Very entrepreneurial, we are very ambitious, we want to grow.”