Brisk business on Boutique Street
IPE Real Estate

Brisk business on Boutique Street


Almacantar, launched last October by Neil Jones and Mike Hussey, had its first closing in April, raising €150m. Both Jones and Hussey have built reputations in the real estate business – Jones was formerly chief executive of Grosvenor, continental Europe, and Hussey managing director of the London portfolio of Land Securities. The new venture will focus on property in central London and central Paris. “We don’t need to be in both markets. Having that geographical scope means we can select where we believe there is best value,” says Jones.

“The opportunities we see over the next few years are for those management teams that have the skills to take secondary quality income and improve it through the repositioning of assets,” he adds. “It might be through renovations, redevelopments or reorganising the leases. To be able to do that requires a very strong understanding of the occupier market, the issues tenants are facing, and being able to solve those for the occupier. By doing that one improves the quality of the income and creates value.”

All these new ventures have managers have with solid reputations and proven business success. Investors need the comfort of entrusting money to tried and tested managers. The driving factor behind a decision to invest is that a new manager must have a believable story, must convince investors he can add value to a portfolio. The evidence of this is the manager’s track record.

Track record is all important, says Tommy Brown, principal and co-founder of real estate investment manager Clerestory Capital Partners. “The real estate world is changing but at a slower rate than everyone expected. You are probably not going to garner capital from investors unless you are a tried industry veteran, like Ric Lewis, Mike Hussey or Neil Jones.”

Another important issue to investors considering investing with a new boutique is alignment of interests between themselves and the manager, says Kirstin Irvine, European real estate researcher at Mercer…

The Almacantar model is one where the investors are shareholders in the fund. Compared with the externally managed investment vehicle, Jones and Hussey feel that there are several advantages of the internally managed corporation, in terms of alignment and governance. Management, in terms of expertise/talent, is exclusive to the vehicle and fully dedicated to implementing its business plan; shareholders participate in both returns on assets as well as any business value created; there are no fee arrangements between investors and management – by definition, shareholders fund the overhead of the business. On the subject of governance, key decisions in terms of budget, investment strategy, acquisitions and sales etc, are the remit of the board of directors, upon which both management and investors are represented, with investors holding the majority of seats.

If alignment of interests between managers and investors has taken on a new importance for investors over the past few months, so has alignment among the investors themselves. Different types of investors have different priorities. Having the same goals is regarded as vital: multi-managers have different concerns from pension funds, for example.

“A multi-manager fund needs to have regard to the dynamics of their own investors,” says Jones. “What I prefer to call proprietary capital – it might be a pension fund, or high net worth investor, private organisation – they tend to be more open ended. They may decide it’s more beneficial to carry on with investment in vehicles because of the market cycle. A multi-manager or fund of funds might be constrained by the life of their own vehicle. They have much less flexibility in terms of what they do next.”