Two senior executives have left Blackstone Group to set up a real estate platform at hedge-fund operator Och-Ziff Capital Management.
Steve Galiotos and Steve Orbuch, who were named managing members, will form a private-equity and asset-management group that is expected to launch an opportunity fund.
The duo is putting together a team of five or six specialists to line up investments. They have already hired Daniel Katz as an associate. Katz was an associate at Blackstone for three years before leaving to get a master’s degree.
Although Galiotos and Orbuch declined to comment on fund-raising plans, they are likely aiming to raise an initial, undetermined amount of equity by yearend. The group will invest in all property types, primarily in North America.
Orbuch and Galiotos were managing directors at Blackstone’s opportunity-fund area. Orbuch was at New York-based Blackstone for nine years, while Galiotos was an employee there for seven years. They worked on all four of the company’s domestic opportunity funds, which have about $4.7 billion of total equity. The funds have all been highly successful, consistently surpassing their 20% targets for annual returns.
Orbuch was responsible for the acquisition of nearly $2 billion of real estate, including a substantial portion of Blackstone’s office and industrial portfolio, as well as many development projects. He also handled several billion dollars of dispositions. Galiotos was in charge of Blackstone’s retail and multi-family investments, as well as the acquisition and financing of several major office and senior-living assets. The investments he oversaw also totaled about $2 billion.
Blackstone declined to comment on the departures, but the firm is expected to seek replacements. Orbuch and Galiotos worked directly under John Kukral, one of the co-founders of Blackstone’s real estate group. They were apparently happy working at Blackstone, but welcomed the opportunity to run an operation themselves.
The other co-founder of Blackstone’s team, Thomas Saylak, made a similar move at the beginning of the year, when he jumped over to Fortress Investments of New York to launch a high-yield real estate investment program. Saylak’s specific plans have not yet been unveiled. But his noncompete agreement with Blackstone expired a few weeks ago, so he is expected to begin assembling a team and raising money for a fund within a few months.
Real estate is a new business line for New York-based Och-Ziff, which is headed by Daniel Och. The global institutional asset- management firm has focused on convertible arbitrage, merger arbitrage and distressed credits. It invests through four funds with more than $6 billion of equity.
Copyright HARRISON SCOTT PUBLICATIONS Jul 23, 2003
