Strange Bedfellows: Are GreenOak investors losing out as a result of the firm’s partnership with hedge fund Tetragon Financial Group? (Revised)
GreenOak Real Estate founders Sonny Kalsi, John Carrafiell and Fred Schmidt, who formed the firm in 2010 after overseeing massive losses for pension fund investors in Morgan Stanley Real Estate Funds (“MSREF”) during the financial crisis, brought on hedge fund Tetragon Financial Group (Euronext Amsterdam: TFG) as an early investor and equity owner.
TFG affiliates provided operating, infrastructure and administrative services to GreenOak as recently as 2015, and infrastructure services as recently as 2016. This arrangement may made have made sense at the outset, after raising nearly $6 billion over seven years, the firm should consider bringing in-house any services that continue to be outsourced.
TFG reported in 2013 and 2015 that the TFG Master Fund was entitled to invest in GreenOak “on preferred fee terms.” TFG’s most recent annual report does not state whether this preferred-fee relationship continued in 2016.
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Real estate mogul Sam Zell singled out MSREF as a bad actor during the financial crisis, stating in 2010 that “The fund got too big and lost control of its ability to make investments.”
The past could be prologue for GreenOak. “Institutional memory has been very short,” said MB Global Partners CEO Maria Boyazny in May 2017, noting further that leverage levels are approaching pre-crisis volumes and deals are getting riskier.
UNITE HERE has updated its report following reaction to an earlier version by GreenOak.