The former chief of ING is back with a new venture, but this time at the other end of the fund management scale
Robert Houston had been global chief executive of ING Real Estate Investment Management for less than eight months when he tendered his resignation last April.
A month after his appointment in September 2008, with the world in financial meltdown, ING was forced to go to the Dutch government for a €10bn cash injection to shore up its balance sheet.
It meant that parts of ING were centralised and drawn back to its native Netherlands, there followed a fundamental change in the strategy of its global fund business. The growth strategy that Houston was implementing was flipped to one of conservatism and retraction.
The change in strategy led Houston to resign from the company of which he had been part for nearly 30 years.
Now, Houston is back. This month, he launched his new venture, the St Bride’s Alliance, to reclaim his position as one of the biggest names in property fund management with his new partners, Stephen Pyne, Mike Harris, Trevor Morgan and Richard Bennett. Houston spoke exclusively to Property Week about the business.
“My role as head of the global investment business of ING was necessarily going to change because of the collapse of Lehman [Brothers] and the global problems,” he explains. “I wanted to grow the business, but in that market it was going to be very difficult. At the age that I am, I wanted to continue to develop a business.”
Houston says his new venture will provide a “boutique” fund management service.
“When I hung up my Boots at ING, I really wasn’t sure what I wanted to do next,” he says. “But what did quickly become very clear to me was that there are only going to be two types of fund manager in the future: the very big and the boutique.”
The St Bride’s Alliance brings together five businesses: St Bride’s Strategic Advisers, St Bride’s Fund Managers, Oxygen Asset Management, Morgan Capital Partners and SHOR Associates (see below). Between them they will provide a range of fund management services, including investment strategy, money raising, asset management, agency and workplace consultancy.
Each business will pay to have Houston on its board and they will also pay a subscription fee to Boost Charitable Trust, the sports charity of which Houston is the chairman of trustees.
By the end of next month, all five businesses will be based at 5 St Bride Street in the City of London. Houston owns the building, which is being refurbished by SHOR Associates. Despite all being part of the same group, there is no formal agreement between the firms to share clients, information, pass on business or to collaborate.
Houston says St Bride’s Alliance is an entirely new model: “We have got together a range of different boutique businesses, but the priority is for each of these to flourish in their own right. There is no obligation to work with each other but there is an expectation that we will want to work together.”
Hypothetically speaking, St Bride’s Fund Managers could raise a fund and St Bride’s Strategic Advisers could advise. Oxygen Asset Management could source and assess investment opportunities, and Morgan Capital Partners could carry out agency and asset management work. If any development or refurbishment work were required, they could bring in SHOR Associates.
Oxygen director Mike Harris says the arrangement gives his business access to skilled professionals with whom it would otherwise be difficult to engage.
“We could never afford to bring in these sorts of guys in a conventional structure, whereas in the Alliance we can call one of them two days one week, four days the next and none the next,” he suggests.
While the St Bride’s Alliance will be able to provide a range of services, it is clear that St Bride’s Fund Managers, led by Stephen Pyne, will be the lynchpin. Its ability to raise money is likely to help feed the other businesses. It aims to have between £200m-£300m of assets under management by the end of 2012 by raising money from UK institutional clients.
Houston says: “It will be difficult to raise money in this market, but raising capital for separate segregated accounts — be it from institutions, pension funds or wealthy individuals — rather than just individual funds, will be easier.
St Bride’s Fund Managers will invest in the UK and overseas with particular emphasis on North America. Houston is in discussions to start a US-based arm, as it is the market that has been “the most beaten up”. The funds will invest in prime property with asset management opportunities in all sectors. The focus will be on maximising income, rather than solely on capital value appreciation.
“We have had a generation just passed which has had instant gratification in the property industry as the capital markets allowed it to borrow and get capital value,” says Houston. “What Stephen [Pyne] is offering is an experienced and safe pair of hands.”
Part of the strategy will be to optimise the environmental credentials of assets under management. However, Houston says the firm should be pragmatic.
“It is no good saying we are only going to buy the greenest of buildings, because that only means that someone else owns the other buildings,” he says. “What we need is incremental improvement — taking a portfolio from a score of 2 out of 10 to 4 out of 10 is probably better than taking a portfolio from 8 out of 10 to 9 out of 10.”
Green values are not the only ones central to the alliance, though. Houston says the three core values the firm is based on are honesty, integrity and a sense of fun: “We are in fairly miserable times so it’s crucial that all the parties enjoy what they do.”
The subscription to Boost means that the charity and sport in general will be central to the firm’s culture. But Houston says that, even though there are five businesses, there are no plans at present for a five-a-side football team.
These are tough times in which to set up a fund business and Houston is one of property’s biggest bears at present. It will have a tough baptism, but Houston has the experience to make it prosper.
The bridal suite
St Bride’s Strategic Advisers
The newly established St Bride’s Strategic Advisers is Robert Houston’s wholly owned personal advisory business. Houston is senior adviser to UBS Global Real Estate. He may also work with other clients within the alliance.
St Bride’s Fund Managers
The fund management business is run by Stephen Pyne, previously global portfolio manager at ING Real Estate Investment Management. The firm aims to have £200m-£300m of assets under management in the next three years by raising money from UK institutions. Fees are likely to be income based with target returns in high single digits. Funds will invest in the UK and overseas. It may also arrange “club” deals to buy larger assets in the US. Pyne is the majority shareholder but Houston also has an equity share.
Morgan Capital Partners
Morgan Capital Partners is the new name for Morgan Consulting, the central London agency and asset management firm. The firm is a partnership headed by Trevor Morgan — a founding partner of Morgan Pepper — Ken Edwards and Alex Morgan. It will source investment opportunities in central London for St Bride’s Fund Managers and is expected to carry out much of its agency work. Among its clients are the Church Commissioners and City Site Estates.
Oxygen Asset Management
Oxygen is run and owned by Mike Harris and Aston Woodward. The company sources individual investment opportunities for prospective buyers with a view to taking on incentivised asset management after the purchase, through redevelopment, refurbishment or tenant management.
Clients include London & Stamford Property and ING Real Estate Investment Management. The company is also in the process of establishing a client base of South African investors to make acquisitions in the UK.
Workplace consultancy SHOR is run by Richard Bennett. It is owned by the SAIR Group, which also owns Aros Architects. The company advises occupiers and landlords on the structure of office accommodation, deals with changes of usage, sustainability issues and refurbishments. The company worked on UBS’s £100m fit-out of Broadgate in 1989.