Today's insight is tomorrow's investment

Real estate’s movers and shakers

Published on March 13th, 2017

When EuroProperty asked more than 100 senior industry professionals who they would include in a list of the most influential real estate figures of the past 25 years, we kept things deliberately broad. The influence could be positive or negative; it could have been over the entire period, or concentrated to a few years that nevertheless had a lasting impact; the person might have influenced just one country, or the entire continent.

A few trends stood out. One was the significant amount of Americans as well as Europeans who were nominated – undoubtedly, as some of our former editors expand on (see p16-18), one of the biggest features of European real estate over the past 25 years has been the influences imported from the US, particularly in private equity and finance, for better and for worse.

The second was the dearth of women. Hopefully when EuroProperty runs this poll again in 25 years, that will have changed.

But most of all was the number of those nominated who had fought back against adversity, often bankruptcy and failure, to re-establish themselves or their company at the forefront of the industry. It would seem the quality real estate admires most, and those hoping to prosper in future should cultivate, is perseverance and determination.

25. Pierre Vaquier – Formely of AXA Investment Managers – Real Assets
The chief executive officer of AXA Investment Managers – Real Assets joined the company in 1993 and took on the top job in 2007. In that time AXA has grown to become the largest real estate investment manager in Europe, with significant global exposure, having made large investments in the US and Asia as well. AXA has also been a pioneer in terms of finding alternative ways for its clients to invest in real estate, and making big profits – it was one of the first insurance companies to set up debt funds, and did so when profits for this sector were at their highest; and is one of the largest investors in alternative sectors in Europe.

24. Carlos Puri Negri

Carlos Puri Negri is one of the dominant figures in Italian real estate history. A former television executive and producer at the Venice Biennale, he moved into real estate in the late 1980s and held a series of positions at various groups, the highest profile being head of Pirelli’s real estate division. He left Pirelli in 2008, by which time the company was undergoing a major restructuring, having overexpanded during the boom years and undertaken debt-fuelled deals, including taking a stake in a €4.5bn German department store portfolio leased to Arcandor, which subsequently went into bankruptcy.

23. Stephen Vernon – Green REIT
Vernon was already one of the most successful property investors and developers in Ireland before he set up and floated Green REIT in 2013 – but that business changed the face of Irish and European property. Creating a listed company to invest in what was considered a distressed market meant that Ireland was no longer the preserve of vulture funds – it created a buyer with a lower cost of capital than private equity firms for sellers looking to offload good-quality assets, providing liquidity and essentially helping to create a floor for values. And it created a template that was followed to great success by the likes of Merlin and Hispania in Spain, proving that investors would back listed companies buying into distressed markets.

22. Andy Ruhan – Sentrum
A figure who essentially invented a sector in Europe all on his own, Ruhan is one of the pioneers of the data centre sector. Given the exponential increases in data creation being driven by sectors such as ecommerce, artificial intelligence, big data and virtual reality, the sector can only balloon over the coming years. He sold a 66% stake his first company, Global Switch, to Chelsfield for £100m in 2002 – after taking control of it the Reuben brothers sold 49% to a Chinese consortium for £2.4bn in December last year. Ruhan also made a huge profit when he sold three UK centres to Digital Realty Trust for £715m in 2012.

21. Sir Stuart Lipton – Lipton Rogers

London developer Lipton is best known for developing Broadgate, the office campus in the City of London, while head of developer Stanhope. Broadgate set the template for schemes like King’s Cross, taking as it did an under-utilised location well served by a train station and bringing in different architects for different buildings. As well as this, it also relocated the physical heart of the City of London away from the Bank of England to Liverpool Street, a permanent alteration of an ancient location. With Chiswick Park he also invented the modern concept of the business park.

20. Ron Spinney – Hammerson
One of the most revered chief executives in the UK property market, Spinney took the reins at Hammerson in 1993, having made his name in the 1980s at developer Greycoat. As with so many UK companies at the time, it was struggling badly and had an unwieldy and sprawling collection of assets, and was seen as being run in the interests of the Hammerson family. Spinney modernised the company, introducing an up-to-date focus on corporate governance, and set it on the way to becoming the shopping centre specialist it is today. Under his watch it developed the Bullring in Birmingham and WestQuay in Southampton, as well as expanding its French portfolio.

19. Jürgen Ehrlich and Frank Billand – Union Investment

The two men that shaped what is today Union Investment, the company that has continually set the template for the German open-ended funds sector, one of the largest single classes of investor in Europe. Ehrlich was the man who helped Union grow to what it is today – when he stepped down as managing director in 2003 after 38 years at the company, Difa, as it was then, had grown from a small investment firm to one with €14bn in AUM. Billand’s greatest achievement was continuing this steady leadership, but also selling €2.5bn of Union’s worst properties to Morgan Stanley and IVG at the top of the market in May 2007, which allowed Union to emerge from the downturn in better shape than its rivals.

18. Jeff Schwartz – ProLogis
Schwartz, who passed away in 2014, was perhaps the key figure in bringing modern logistics to Europe and the UK, establishing a sector which is now the darling of institutional investors, and benefiting from and helping to shape the ecommerce revolution. Having joined US sheds giant ProLogis in 1994, he spearheaded its expansion into Europe, heading the European business from London in 1997, before moving back to the US in 2005 when he became overall chief executive. It remains the largest logistics company in Europe, with 17m sq m of assets.

17. Manuel Gonzalez Garcia – Metrovacesa

It seems unfair to pick one person to represent the boom and bust of the Spanish property sector, which went on a debt- fuelled building spree that ended with the country’s banks having to transfer more than €100bn of bad debts to a bad bank. But as chief executive of Metrovacesa during the boom years, Gonzalez Garcia is as good an individual as any. The company was briefly the second biggest property company in Europe, but this was largely fuelled by debt – when it hit the rocks in 2008 it had debt of more than €7bn and assets, mainly land and developments, worth a lot less.

16. Nick Porter – GSA
If anyone can be said to have invented the asset class of European student accommodation, it is Porter, currently executive chairman at student accommodation investor and developer GSA. As founder of Unite in 1991, he was a pioneer in a sector that simply did not previously exist in the UK and Europe. He grew Unite into a FTSE 250 company, showing that the public markets would back such companies, and through joint ventures with funds like GIC, showed that global institutions would invest in the sector, which has now gone from a property alternative to something firmly in the mainstream.

15. Richard Tice – leave.eu
Richard Tice is not in this list for his achievements in property. Being chief executive of a FTSE 250 company, CLS Holdings, and running a regional UK fund manager with assets under management of £500m, Quindell, is respectable. But it is in the world of politics that Tice had a huge impact, as co-founder of leave.eu, one of the two main organisations which led the campaign for the UK to leave the EU, and a close supporter of Nigel Farage. In that sense, he has had an enormous impact on economies across Europe, and thus a massive knock-on effect on property.

14. Patrick Kanters – APG
“You paint on the biggest canvas, you can’t help but make a big impression,” said one of his peers of Kanters, global head of real estate and infrastructure at Dutch pension fund APG. In that role he has led the investment strategy of one of Europe’s biggest and most innovative pension funds. As one of the largest investors in listed real estate shares in Europe, he was a driving force behind the merger of Klépierre and Corio in 2014. And he has also championed bodies such as INREV, bringing greater transparency to the fund industry, and led the charge in terms of making sure sustainability is at the forefront of APG’s investment policy.

13. Wolfgang Egger – Patrizia
Wolfgang Egger reinvested the profits from a house he had built himself into a multi- family dwelling in Augsburg, Germany, in 1984, and Patrizia was born. From that humble beginning the company has grown into one of Europe’s biggest and best- regarded fund managers, with almost €18bn of assets under management, completing huge deals for investors across the globe, such as the €720m acquisition of Frankfurt’s Commerzbank Tower. As with ECE, it is one of the few German property companies that is genuinely well-known and international, and Egger is renowned by those who know him as being a genuinely innovative thinker.

12. Mark Dixon – Regus
Dixon’s was a name cited by his peers more regularly than one might imagine, but he is another real estate figure that had the determination to rebound from a major setback, on top of having forged the serviced office sector out of nothing. In 2003 the US arm of his serviced office company, Regus, filed for chapter 11 bankruptcy, and the UK arm was in financial difficulty, in the wake of the dot.com crash. But it emerged from bankruptcy within a year, and has grown to become a global brand, with 3,000 business centres in more than 100 countries.

11. Paul Reichmann – Canary Wharf Group

He may have gone bust getting there, but Paul Reichmann’s grit and determination made Canary Wharf a reality, a gleaming financial district that rose out of a post- industrial desert. It was the beginning of the shift to the east which continues in London to this day, and showed what could be done with former industrial areas when government and private developers worked together, and highlighted the power of infrastructure investment. He was one of the few people to believe that big banks could be lured out of the City, and he
made it happen. Canary Wharf continues to evolve today.

10. Rupert Nabarro – Investment Property Databank

Nabarro may not be the sexiest or highest profile name in this list, but he has exerted an undoubtedly major influence over real estate in the past quarter century. It is important to remember what real estate was like before he and Ian Cullen founded the Investment Property Databank. In the public imagination it was the preserve of spivs and hucksters, and institutional allocations to the sector were minuscule compared to bonds and equities because of the lack of transparency. If you wanted to know the vacancy rate of a particular market, and how that compared to others, for instance, a broker might be able to give you a ball-park figure, but that was all. IPD created an industry that could be measured, analysed and, importantly, benchmarked, thus making it more acceptable to institutional investors, and bringing more money to the sector. If investors knew how their investments would perform, in comparison to bonds and equities, they could have more confidence in putting equity to work. What started as a UK business also moved into Europe, enabling comparison between markets, thus facilitating the development of a pan-European investment world.

9. Méka Brunel – Gecina

As the chief executive ofGecina, the Paris office specialist with a market capitalisation of more than €8bn, Méka Brunel is one of the most powerful women in European property, and certainly the most influential. Never has a property company of this scale had a female chief executive. But she is worthy of inclusion not because of gender, but because of the role she has played in changing the way global institutions have invested in Europe post- financial crisis, and also in the emergence of logistics as perhaps the hottest asset class of the last few years. As head of Europe at Canadian pension fund Ivanhoé Cambridge she was one of the pioneers of platform investing, the strategy of backing best-in-class joint venture partners to build platforms in specific countries or sectors, rather than just buying individual assets. One of these platforms, P3, has shown how logistics is a sector with huge room for growth. Buying the business for €750m after a failed IPO in 2011, Ivanhoé and its partner TPG sold it for €2.4bn to GIC last year.

8. Scott Malkin – Value Retail

Scott Malkin’s retail holdings might not be the biggest in Europe, but they are certainly the most influential, and his company, Value Retail, has changed the face of the sector here. When he set up Value Retail in 1991, he essentially transposed the outlet mall concept from the US to the UK and Europe. It is still not as large a concept as in the US, but it is now very much an institutionally acceptable asset class. But of greater magnitude is the way he has put experience at the heart of retail in a way that others across the sector are now struggling to copy. The success of this is highlighted by the fact that tourists from around the world flock to his Bicester Village scheme, despite the fact that it is located in a small village 40 miles outside of London. The fact that so many visitors there are Chinese – there is one estimate that 20% of all Chinese visitors to the UK visit the scheme – shows how Malkin has also grasped better than anyone else the links between tourism and retail and the shift in the balance of power to the east.

7. John Carrafiell and James Lapushner – MSRE

If Peter Cummings is the lightning rod chosen to epitomise the highs and lows of real estate lending during the boom and bust years of the last decade, John Carrafiell, former global co-head of Morgan Stanley Real Estate, and James Lapushner, head of German acquisitions for the investment bank’s fund management arm, play the same role in the world of real estate private equity, being commonly cited by the real estate professionals polled by EuroProperty. Carrafiell had multiple roles at Morgan Stanley, overseeing the European investment business, lending business and investment banking business, and when he was good, he was great. As a lender his team were instrumental in bringing CMBS to Europe, for better or worse; as an adviser he worked on the biggest transactions, such as the 2004 takeover of Canary Wharf Group; and MSREF under his leadership raised and deployed record amounts of equity. Alas, much of that equity was deployed in the boom years just before the crash with very high levels of leverage, and much of investors’ equity was eroded in funds like MSREF VI. The firm spent years trying to claw back losses, many of which were in Germany, where MSREF boasted of having invested $10bn, in a drive led by Lapushner. The epitome was the Pegasus portfolio, a €2.1bn transaction where MSREF had to hand the keys back to lender RBS.

6. Alexander Otto – ECE

Very regularly, when an heir is put in charge of the family firm, especially a large firm, it ends badly – after all, there is no particular reason why the best person to take over a large business is someone who carries your genes. But Alexander Otto took over ECE, the real estate business established in 1965 by his father Werner, the mail order retail magnate, and turned it into Germany’s most successful property company, and the one best known outside of Germany. Otto joined the family firm in 1994 as a project manager, and took over as chief executive in 2000. During this period he took a developer and centre manager which had been highly successful in Germany and internationalised it – today, 51 of the 199 centres it manages are outside of Germany. He also adapted the company’s model when the world changed. After the 2007 crash, the model of the developer trader using the family fortune was not as viable, with banks less willing to lend to development and refurbishment projects. The family office still invests in new acquisitions and developments, but ECE is one of the largest specialist shopping centre fund managers in Europe, with two funds that, when fully invested, will have raised €1.5bn of equity and manage €4bn of assets. Where rival firms like Multi or Sonae Sierra were slowed down or bought because of debt issues, ECE has flourished.

5. Peter and Michael Freeman – Argent

Some might question whether the brothers who co-founded Argent should be above a UK developer like Sir Stuart Lipton (see no 21), but this list can look forward as well as back, and you could argue that no developers will have a greater influence on real estate over the coming decades. Placemaking is now an everyday phrase in real estate, due to the incredible success of King’s Cross Central, the urban development scheme which Argent began in 2000. Once a derelict, abandoned area renowned for prostitution, King’s Cross Central is now the scheme to which every new large development aspires. It combines a range of uses, and has been bold and visionary in having a university as an anchor tenant, giving it the young, vibrant atmosphere which every development now strives for. The fact that Google is building its 100,000 sq m UK headquarters at the scheme is the final imprint of its success and importance. The Freeman brothers have stepped back from the business now, but the thoughtful, forward-thinking company that changed development was moulded in their image, and it is now taking on major residential-led developments in outer London areas, having brought US developer Related to Tottenham – something no one in real estate would have thought possible 25 years ago.

 

4. Peter Cummings – HBOS

This list had to have one banker as the sacrificial lamb to be slaughtered, a metonym for the faults of every banker and borrower who brought about the biggest destruction of real estate value in modern times. Cummings fits the bill better than most, having overseen the commercial lending division of HBOS, the UK bank which was the most prolific lender to real estate in the run up to the crisis. As the market ramped up, so did the appetite of HBOS for exposure to the sector. It was not complexity that brought it down, as with other lenders such as Royal Bank of Scotland, or exposure to subprime, but the fact that it lent at ever higher loan-to-values, and because during the boom lending to real estate was profitable, it kept most of its exposure on its balance sheet. When values dropped, it was horribly caught out, and took more than £30bn of losses related to commercial real estate. Against a total loan book of £88bn, that is an astonishing destruction of value. But he has had a positive impact as well, because it will be a long time before banks lend at such high LTVs again. Real estate banking is determined not to forget the lessons that people like Cummings taught it, and when the next downturn comes, it will not be precipitated by debt.
3. Gerald and Howard Ronson

The two cousins very much set the template as to how the public thinks of property developers and investors. Having both worked in the family development firm, from 1971 Gerald and Howard Ronson ran separate businesses and mostly operated in different markets, but both achieved incredible success and developed millions of square metres of commercial space and bought and sold billions of pounds, euros and dollars of property. Both epitomise the grit and determination to succeed and, more importantly, to bounce back from adversity, that the property industry admires perhaps above anything else. By the early 1990s Gerald had built up an investment and development business with assets of £1.5bn, but along with other over- leveraged firms it almost went to the wall in the 1990s crash, owing bondholders £1bn. The firm was rescued by investors including Bill Gates and Oracle’s Larry Ellison, and went on to complete major developments such as the Heron Tower office building and Heron residential building in London’s City. In August 1990 he was convicted for his part in the Guinness insider trading affair, and was one of the only figures involved to serve a jail term, perhaps a result of the fact he was one of the only people involved not part of the City establishment. For all the property development, his investment in petrol stations has probably been his most profitable investment – started 50 years ago, the 200+ stations he owns now have sales totalling £1.5bn. Gerald took his business abroad, investing in Spain and France, but it was Howard who was the truly international developer. His company, HRO, developed more than 1.5m sq m of commercial space in Europe, principally France, the US and the UK over a period of 20 years. He too had his setbacks, and the 1980s US property crash resulted in his business there being placed in chapter 11 bankruptcy. He sold assets, paid back debt, and in 1996 established a European business that developed dozens of office buildings around Paris – and HRO still operates in Europe today. Say the name Ronson in Paris or New York, and those in real estate there will immediately think of Howard.

2. Chad Pike and friends – Blackstone

It is hard to overstate Blackstone’s influence on European real estate. To put it simply, they won. Few property investors emerged from the financial crisis in better shape than they entered it. And none came out in as good a shape as Blackstone. It managed to restructure deals made prior to the downturn, minimising investor losses, and with major competitors falling away, it was ideally placed to become the dominant force in real estate investing. But it is also hard to pinpoint one individual to whom this success should be attributed. John Kukral – now of his own firm, Northwood Investors – established the European real estate office in the early 2000s. Chad Pike built the business in the run up to 2008, and steered the ship during the rocky period of the financial crisis, and headed the real estate division in the immediate aftermath when it made some of its most profitable investments. But he left the division in 2010, when Ken Caplan took over as head of Europe, and oversaw a period, from 2010 to 2013, when it grew into the capital raising giant it is today, and used this scale to become one of the few private equity firms active in the market when the best deals were there to be had. Honourable mention must also go Anthony Myers, who has been head of Europe since 2013, and consolidated this success. And, of course, sat above all this is global real estate head Jon Gray, who has guided the entire Blackstone business,
and is actively involved in European transactions, calling up lenders on relatively small deals to try to leverage the best deal for the firm and its investors. Among the senior real estate professionals canvassed by EuroProperty, it was Pike’s name who came up most frequently, having taken a firm that was one among many US private equity firms in Europe and put it head and shoulders above a peer group that constantly tries to copy its model, but might never be able to match its success. In Europe, there were remarkably few highly leveraged deals made prior to the crash where it had to write down the value of its investment. And before Pike left to set up the Tactical Opportunities division of the firm, it completed what was clearly the best deal of the downturn, a £75m equity investment in a 50% share of the Broadgate office scheme in London’s City which was later sold for £450m.

1. Léon Bressler – Unibail, Aermont

When EuroProperty contacted more than 100 senior professionals to ask them who had been the most influential real estate figure of the past 25 years, one name came up far more than any other – Léon Bressler. And the word used more commonly than any other was “visionary”. Having created the biggest and most successful listed company in European real estate from the ashes of the crash of the early 1990s, he went on to launch one of the most innovative and highly respected real estate private equity firms – a record of success in two different fields of real estate that is virtually unmatched in the sector. When Bressler took over as chief executive of Unibail in June 1992, he was a banker with a background of working for fashion companies like Lanvin, and Unibail was a real estate credit leasing company that had moved into buying assets and developing offices in Paris in the late 1980s and early 1990s – exactly the wrong time. Bressler saved the company, as one respondent put it, from “obliteration”, cleaning up its balance sheet, but also putting it in a position to profit from the distress of others, primarily through the launch of Crossroads Property Investors, Europe’s first opportunity fund. During the early and mid-1990s Unibail bought or consolidated its ownership of flagship schemes such as the Quatre Temps and Forum des Halles shopping centres, still the bedrock of the company today. In the next crisis, the dotcom crash of the early 2000s, Unibail delivered the speculative development of the 160,000 sq m Coeur Défense office scheme, a move that paid off handsomely when it sold the building to Lehman Brothers for €2bn at the top of the market in 2007. By the time he stepped down as chairman in June 2006, having schooled his successor Guillaume Poitrinal for more than a decade, Unibail was about to embark on its merger with Rodamco and was, as one respondent put it, the only European property company to draw the interest of global investors in the same way as Simon Property or Westfield. He had revolutionised one company, but also the listed market, with a focus on corporate governance and cash flow. He left in 2006 to set up his own private equity firm, then part of Perella Weinberg, now a standalone firm, Aermont, and raised capital in 2007. Unlike almost all his peers, he had the discipline to not invest in the heady days of the boom, instead waiting until 2009. As a result, Aermont’s returns have been stellar, and it has undertaken some of the most profitable private equity deals of the downturn, including the purchase and sale of German retail developer mfi, which it sold to Unibail, and the purchase at a huge discount in debt secured against Coeur Défense, which it ultimately sold back to its current owner Lone Star at its face value. Aermont is now blazing a trail in alternative sectors, having taken private listed film studio Pinewood last year, and backed The Student Hotel, a hybrid student accommodation and hotel company, in its European expansion. Bravery, constant innovation, adherence to a core philosophy while maintaining a flexible mindset, fostering talented young teams and allowing them to lead – these are the characteristics that have made Bressler a visionary. It is why he dominates this list – and European real estate.

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Today's insight is tomorrow's investment