REPE Fund Profile Series - Part Seven: The Carlyle Group

Welcome to Part Seven of our Fund Profile Series. In this series, we delve into the inner workings of the top 50 global real estate private equity (REPE) firms according to the 2020 PERE 100 list.  

Each REPE fund profile briefly summarizes each fund’s history, as well as getting into the details of how the firms carry out their real estate equity investments. By the end of each post, we’re hoping you’ll be able to arm yourself with enough knowledge for your upcoming REPE technical interview!

Without further ado: now that we’ve looked at AEW in Part Six of the series, it’s onwards to the Carlyle Group.

Key facts about the Carlyle Group

Back in 1987 in Washington D.C., five founders—William E. Conway Jr., Stephen L. Norris, David M. Rubenstein, Daniel A. D'Aniello, and Greg Rosenbaum—came together to form the Carlyle Group as a boutique investment banking firm (also known as a merchant bank). Stephen Norris actually named the firm after the famous Carlyle Hotel in New York City in homage to one of his investment banking heroes. 

Twenty years later in 2007, Carlyle sold a 7.5% stake for $1.35B to the Mubadala Development Company (an Emirati sovereign wealth fund based in Abu Dhabi)—its second major Middle Eastern link—which was widely seen as a precursor to an initial public offering (IPO). 

Eventually in 2012, the firm went public on the NASDAQ stock exchange after completing a $700M IPO. At the time, Carlyle’s market value had settled at $6.7B (a little below its expected enterprise value, and significantly lower than the $18B figure agreed for the Emirati deal in 2007).

All five founders have backgrounds in finance and government, which makes sense given the firm's headquarters are based in the same neighborhood as one of the most famous government offices in the world! 

Not entirely unrelated: the Carlyle Group is known for its acquisitions in the defense industry, plus links to former U.S. president George W. Bush and other political leaders who have been appointed as special advisors to the firm in the past (we’ll come back to that later).

Today, Carlyle has a global team of over 1,800 professionals spread across its 26 offices in 5 continents. The firm’s international hubs include Amsterdam, Beijing, Dubai, Dublin, Jakarta, and Hong Kong. Back in the U.S., Carlyle's headquarters remain true to its original roots in Washington D.C.—other U.S. hubs include New York City, Los Angeles, Miami, and San Francisco.

Looking at the business as a whole, the firm has three main areas of focus across several commercial sectors: global private equity, credit services, and investment management.

A snapshot of the Carlyle Group’s real estate equity investments

The Carlyle Group’s global real estate equity investment portfolio is split between most major asset classes including credit assets, industrial and logistics assets, office properties, retail developments, and hospitality and leisure properties, plus investments at both ends of the spectrum in specialist housing sectors—from student housing to retirement housing.

In total, the firm holds $293B worth of assets under management. Of this, $161B (55%) is held in its private equity business, $66B (23%) in its credit business, and another $66B (22%) in its investment management business which sits alongside the AlpInvest entity (on its own, that entity has over $275B of assets under management).

In terms of real estate, the firm has managed several funds in different geographical markets, specifically in the U.S. (via Carlyle Realty Partners), in Europe (via Carlyle Europe Realty), and in Asia (via Carlyle Asia Real Estate Partners). The largest proportion of the firm’s investments happen to be concentrated in the U.S. focused funds, with the last fundraise closed at $5.5B in 2018. As of 2021, the firm plans to raise at least $6B for its next U.S. real estate fund.

Separately, Carlyle has a specific division within its Global Credit business focused on real asset credits, covering sectors such as aviation, infrastructure, and energy, as well as real estate.

Some of the Carlyle Group’s REPE deals

To make sure you’re prepared for your REPE technical interview, we always encourage you to take the time to examine a real estate private equity firm’s deals, looking at both challenges and successes, to gain an understanding of how said firm chooses its real estate equity investments. 

As a starting point, we’ve given you a few examples of Carlyle’s deals below:

Metropolitan Real Estate (U.S.)

In 2013, the Carlyle Group acquired Metropolitan Real Estate Equity Management, LLC, a global real estate investment management company, for an undisclosed sum. At the time, Metropolitan had over $2.6B worth of assets under management.

Carlyle incorporated Metropolitan into its Investment Solutions business, until a change in direction in 2020. Metropolitan was later sold to BentallGreenOak, a global real estate investment management company (again, for an undisclosed amount) in the first half of 2021.

650 Madison Avenue (U.S.) 

In 2013, Carlyle Group sold a prime office and retail asset to Crown Acquisitions and Highgate in a deal worth $1.3B via its Carlyle Realty Partners V fund in the U.S. The deal comprised 600,472 square feet (just over 10 soccer fields) in a prestigious area of Manhattan, New York City.

The Canyon Portfolio (France)

In 2019, Carlyle Group joined forces with Othrys Asset Management and agreed to acquire around 538,000 square feet (a little larger than Grand Park in Los Angeles) of commercial real estate in Ceetrus SA’s Canyon portfolio in France for EUR €45M (around $51.5M) via its Carlyle Europe Realty fund.

At the time, the portfolio was made up of 9 assets, including 160 tenants, across shopping malls or co-owned lots adjacent to hypermarkets. The deal was later cancelled at the beginning of 2020.

Beechcroft (UK)

In 2020, the Carlyle Group acquired Beechcroft from Alchemy Partners for an undisclosed amount via its Carlyle Europe Realty fund. Beechcroft is a specialist developer of properties for sale within the senior residential housing market in the UK. 

ARA Dunedin (England)

Also in 2020: in another Carlyle Europe Realty fund transaction, the Carlyle Group joined forces with ARA Asset Management to acquire a portfolio of 11 logistics assets from the Moorfield Group for GBP £102M (just over $139M). The portfolio comprised one million square feet of warehouse and logistics real estate in northern England for e-commerce operations. 

Anything noteworthy or controversial?

Given the professional backgrounds of its founders and its proximity to government figureheads, as we mentioned earlier, the Carlyle Group has been surrounded by various conspiracies. 

Documentaries like Iron Triangle, Fahrenheit 9/11, and the World According to Bush have focused on the firm’s defense investments, leveling allegations of financial gain from increased defense spending after terrorist-related tragedies such as the September 11 attacks. 

In fact, Carlyle’s annual investor conference in 2001, coincidentally also on September 11, took place during the same timeframe as the aforementioned attacks. At this particular conference, the guests included a member of the Bin Laden family (Shafiq Bin Laden, Osama Bin Laden’s estranged half-brother), the former president (George Bush Sr.), and the former secretary of state (James Baker).

At the time, the Bin Laden family had invested at least $2M into Carlyle’s U.S. funds since the mid-1990s. While it’s probably an understatement to say the optics didn’t look so great, the firm later ended up buying the Bin Laden family out and liquidating their existing holdings (with mutual agreement) to avoid the further media frenzy.

Other than the defense conspiracies, the Carlyle Group’s foray into the U.S. mortgage-backed securities market in 2006—via its former Carlyle Capital Corporation entity—failed miserably after defaulting on around $16.6B worth of debt during the global subprime mortgage crisis. 

In 2008, the entity’s shareholders came to a unanimous decision to begin the compulsory winding up and liquidation proceedings. The Carlyle Group group itself was relatively unharmed financially. 

Now back to you...

We hope you found this Carlyle Group fund profile helpful for your REPE technical interview prep. Now that you’re up to speed: do you have the right strategy to sell yourself well at your interview?

Let us help you set yourself up for your new career in real estate private equity investment: check out how we can support your career goals at Leveraged Breakdowns.

 

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About the Author: 

Melody Sadé Abeni is a London-based writer who specialises in commercial real estate content. As a generalist member of the Leveraged Breakdowns team, she crafts detailed posts geared towards those curious about the real estate private equity life. 

In her former professional life, Melody supported senior corporate executives as a global mobility consultant and did her time in both management consulting and specialist asset management firms.