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US bank Citigroup sets up Global Real Estate group

The new group will involve around 200 bankers and be run by James Brent, head of global real estate investment banking, and Marcus Giancanterino, head of global commercial real estate finance.

Brent describes the move as “pulling two existing groups together in a joint venture structure with common management”.

The group will also work closely with other divisions, such as Citigroup Property Investors and Equity Capital Markets.

Real estate activities are looking more attractive for banks as property ownership shifts from occupiers to investors and real estate becomes more tradable in public markets.

Investment banks have also been looking at ways to branch out of traditional activities where profits are falling.

“Opportunities in real estate for investment banks are perceived to be very significant,” said Brent.

Property financing was once dominated by the big commercial banks, but investment banks, mainly from the United States, have entered the arena in recent years.

Deutsche Bank for one is currently looking to hire more bankers in the property sector, build up a network of regional offices and improve links with companies that have large real estate portfolios.

Banks offer merger and acquisitions advice, both to property companies looking to buy rivals and to companies looking to buy or sell property portfolios.

They also help property companies raise cash in equity and debt capital markets and list related companies such as Real Estate Investment Trusts (REITs).

Banks also help structure debt products, such as mortgage-backed securities, bonds whose payment obligations are backed up by pools of properties.

In the year to date, Citigroup has completed more deals in global M&A, equity and debt in real estate than any other bank, according to data provider Thomson.

Citigroup is targeting regions across the world, all of which, they say, are at different stages of development.

He described the U.S. market as mature but active.

“The European market is going through a transitional stage. At the moment it is mainly owned by occupiers rather than the investment community, and the public capital markets are relatively undeveloped,” he said.

“This combination has increasingly given rise to opportunities,” he said.

Equity capital flows into property investments from the US to Europe more than doubled to $9.7 billion in 2004 from $4.6 billion the previous year, according to a report by investment bank Macquarie Capital Partners.

Brent describes Asia as being patchy, with great potential in China and India.

“The intention is to have a common brand of global real estate,” he said.