The Global Merchant Banking Group strategy is currently focused on the exploitation of distress in the ownership and financing of real estate assets, and the creation of value through intensive asset and property management. Within this context, there are three key aspects to the Group’s current strategy: Target Markets, Investment Strategies and Operating Partners. The Group is targeting markets with three characteristics: (1) Institutional Depth – markets with significant institutional depth, liquidity and transparency; (2) Market Distress – markets where distress is or will be most severe; (3) Long Term Growth Prospects – markets with strong long-term drivers. The Group’s most recent fund has a focus on North America and Europe. It also provides investors with the option to tailor their exposure to either of these regions by investing through regional ‘sleeves’. Within these markets, the Group utilizes a combination of three investment strategies:

The Group seeks exposure to direct real estate either on a "one-off" basis or through programmatic joint ventures with Operating Partners. The lack of liquidity and financing in real estate markets will make the execution of larger portfolio transactions unlikely over the next few years so the focus is likely to be on smaller portfolios or individual transactions. The distressed market situation should allow the Group to select quality, well located assets from distressed sellers.       The Group may invest in or acquire privately negotiated debt, preferred equity or mezzanine investments in private and public real estate companies. These can produce equity-like returns when structured to participate in the growth of the underlying real estate. Additionally, the instability in the debt capital markets that are now being experienced throughout the U.S. and Europe can create an environment in which the risk adjusted returns available to mezzanine investors are attractive. This type of investment can be useful in optimizing portfolio performance in light of its defensive characteristics, relatively high income and total return and diversification benefits. This investment may be made at the property, portfolio or entity level in public and private real estate operating companies.       A real estate private equity strategy is designed to enhance the returns from real estate by creating an elevated alignment of interest with management teams executing higher risk-return investment strategies. This strategy is also capable of generating ancillary income and value from the operating platform. The Manager's investment strategy involves gaining affirmative control of real estate companies, either through direct investment in the company or through an exclusive contractual arrangement. In addition to capturing proprietary access to investment opportunities targeting higher returns, the private equity model can further benefit investment results by capturing fees and promoted interests paid by third parties to the operating platforms controlled by the investing Funds; by providing more flexible financing options (e.g., asset, portfolio or platform level secured or unsecured debt financing and joint venture equity financing); by achieving economies of scale in the management of the underlying portfolio of properties; and by providing greater optionality for exiting investments.

The three investment strategies above will be executed predominately in conjunction with operating partners. Partnering with management teams positioned to exploit local market pricing anomalies can be a particularly effective method of capitalizing on distress in the ownership and financing of real estate. These partners will generally have a niche focus in a real estate market and/or specific property type and have demonstrable track records in executing the identified real estate investment strategy.

An alignment of interests is generally created with operating partners by having them make significant co-investments (relative to their personal net worths) in any joint venture or private equity real estate transaction alongside the investing funds and by structuring incentives based on the combined net returns to the funds from all of the investments acquired through the partner. The governance of each investment is generally structured such that the investing funds together retain affirmative control over all key decisions, including investments, dispositions, financing, annual budgets and management staffing. The governance provisions also typically provide the funds with exclusive and proprietary access to the pipeline of investments generated by the operating partner.