Restructured RREEF to go more local

After a tough couple of years, Deutsche Bank’s alternatives-investment arm has narrowed its investments solely to property and its Asia-Pacific client focus to four countries.
Restructured RREEF to go more local

With local management now in place for its four key Asia-Pacific markets, the alternative-investments arm of Deutsche Asset Management plans to tap the pool of client assets spread across Australia, China, Japan and South Korea.

RREEF has spent the past 12-18 months ‘re-engineering’ itself in the words of Deutsche Bank chairman Josef Ackermann. In a speech in early 2009, he said the asset-management business would be recalibrated, with adjustments needed to RREEF’s strategies for real estate and infrastructure.

“We have spent the past 12-18 months working to refocus our strategy globally and in Asia,” says Niel Thassim, Asia-Pacific managing director at RREEF in Hong Kong. Whereas previously the company had been a “full service” alternatives firm – investing in property, private equity, infrastructure and so on – the focus is now entirely on real estate, and the reorganisation reflects that.

As part of this process, the firm has appointed two more country heads, Mark Cho in the newly created role of head of China and Terry Hwang as head of South Korea. (Akira Tsuruoka was appointed head of Japan in the second quarter of last year, while Australia is looked after by Thassim, regional chief investment officer Paul Keogh and regional portfolio manager Louise Kavanagh.)

Both Cho and Hwang are internal promotions. Cho previously held the post of Asia-Pacific chief operating officer (COO), while Hwang was most recently Korea head of acquisitions. RREEF will appoint an internal hire to replace Cho, while Hwang will retain oversight of the three-strong acquisitions team in Korea.

There was no China head prior to Cho, as the market was covered by several senior managers. Historically RREEF had simply invested client money in China, says Thassim, but now that it is expanding to also cover domestic funds and clients, an overall head is needed.

“The aim was to step away from covering the whole of Asia and focus on areas where we really have a strong expertise and focus for clients,” says Thassim.

The traditional business model of real-estate managers in Asia – the fly-in, fly-out approach by a team based in Hong Kong or Singapore – is falling out of favour with clients, he says. “They want local expertise and track record,” he adds.

RREEF's aim of having more local focus and expertise means it will not be replacing a number of regional management roles, such as Brian Chinappi, who left his post as Asia-Pacific head of acquisitions in March, nor Philip Levinson, former Asia-Pacific head of capital raising and client relationships. The firm decided that these activities would be more effective led and managed locally with local expertise, being "very local" activities, says Thassim.

"When we were running a full alternative-investments business in a large number of markets in Asia across real estate, infrastructure, private equity and hedge funds we needed a very different level and depth of management than we do with a pure real-estate investment management platform focused on four key markets," he adds.

However, former regional chief investment officer Mark Fogle was replaced by Paul Keogh, who had been with the firm since 2004. Keogh started as head of Korea and moved to Hong Kong in 2007 as fund manager of the Hong Kong-listed Reit, before taking up the current role.

Thassim himself has been with Deutsche Bank for around 10 years, and when the bank bought RREEF in 2002, he moved from Australia to London as global head of technology and business solutions. He then moved to Hong Kong in 2006 as regional COO, before becoming Asia-Pacific head early last year.

The team may now be in place, but how is the deal pipeline, given how tough markets have been for private equity fundraising and transactions in the past year or so?

Thassim says RREEF has a strong pipeline of deals in the region. This year it has completed three acquisitions in Asia for its offshore clients: Frontier Ebisu in Japan; and the Alpha building and Prime Towers in Seoul. 

It also sold the Gateway Plaza building – a premium Grade-A office complex in Beijing – in February to Mapletree Investments, in what was one of the largest single asset transactions in Asia so far this year. The acquisition price was based on a market valuation of Rmb2.9 billion.

More recently, RREEF received a £450 million mandate from one of Asia’s largest employee provident funds, with 12 million members, to invest in core office, retail and industrial properties in the UK.

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