Lehman sells real estate funds biz to ex-staff

Lehman Brothers Holdings, the investment bank liquidating in bankruptcy, sold the management contract for its real estate funds to the former executives who ran the business, chief executive officer Bryan Marsal said. The investors in the funds “chose overwhelmingly to support a bid led by former management,” Marsal said in an email. “This is not surprising in that the fund managers have detailed knowledge of the portfolio and good historic performance.”

The sale involves three private funds, Lehman Brothers Real Estate Partners I, II and III, with combined capital commitments of about $5.6 billion. Brett Bossung and Mark Newman, who managed the funds before Lehman’s September 2008 bankruptcy, led the group of five former executives who bought the business.

Bossung and Newman will resume day-to-day fund management, while Mark Walsh, their former boss, will “focus on the growth of the business and asset management,” Kimberly Macleod, a Lehman spokeswoman in New York, wrote in an email.
The ex-Lehman executives agreed in June 2009 to pay Lehman about $10 million for the rights to the unit’s management contract, a person familiar with the matter said at the time. Macleod declined to specify the price in the completed deal. Bossung, Newman and Walsh declined to comment.

Lehman invested more than $1 billion out of $5.6 billion of equity in the three funds since 2000. Lehman represents 20% of total commitments across the three funds, said Macleod. The funds have held stakes in Tishman Hotel of the US, 60 UK Intercontinental hotels and Singapore condominiums as well as in Indian and Swedish real estate companies.
Lehman, once the fourth-largest investment bank, filed the biggest bankruptcy in US history in September 2008 as the global credit markets seized up and real estate values tumbled.