Two years after real estate investor Leo Noé brought property investor Capreon and venture capital arm Goldacre into the Noé Group, the family run business is now focused on its expansion.
New partners, new markets and new ventures are all on the cards for the group. Tying together Capreon, run by Leo’s sons Raphael and Zvi, and tech-focused investor Goldacre, overseen by Leo’s son-in-law David Bloom, has opened new opportunities for both businesses, they say.
“From the outset we believed that there were meaningful synergies between what we were doing in the tech space – smart cities, smart buildings, looking for investment in the operating business – and what was happening directly in the asset property sector, but until you actually do it you don’t know how much of your theory is going to be accurate. Two years in we’re a lot clearer,” says Bloom.
Raphael adds: “In order to asset manage properly and to create value, you need to be looking towards technology, you need to be looking towards providing services. You can’t just sit behind a desk and sign new leases. We feel we can add value through the operational and technology sides, which is behind us looking at data centres and beds, where we can have a chunk in the operating business.”
As the team looks to grow the group, it expects new tie-ups to form a central part of this expansion.
“As a group, one of our core things over the next two to three years is expanding our partner base,” says Bloom. “We know we can add value to other capital with our ability to be an investor alongside. As the opportunities grow, we want to make sure we’re maximising.”
Zvi adds: “Over half of the business is third-party money, non-family money, and for us that’s important because if we want to grow, we want to look at different investors with different return profiles and have the ability to look at different products.
“For example, we’re spending a lot of time at the moment trying to do more core, core-plus deals in the UK and Europe because we have some investors who are saying that the wealth preservation piece is important to them.”
To date, Goldacre has invested in 10 tech businesses, including Breezometer, which provides air quality data, and its co-working provider, Techspace. It is also looking for the second wave of tech start-ups to go through its RElab programme.
Meanwhile, Capreon has £2.5bn of assets under management, the majority of which are in the UK but it also features properties in Germany, Netherlands and some legacy assets in India.
The group is now eyeing a move into the residential sector, particularly senior living, according to Zvi.
“It’s an incredibly interesting sector in the UK as there is very little supply but an ageing population. It’s a space we’re excited about. For us it’s about finding the right team to work with and develop a product. We’re hopeful in the next 12 months we’ll do something in that space.”
In addition, the group is also targeting the data centre sector to generate growth.
“You will see more from us in the infrastructure data centre side in the next 12-18 months,” Bloom says, highlighting Goldacre’s partnership deal with L&G earlier this year.
Some of the group’s investments are proving trickier than others. Just over half of the group’s property portfolio comprises retail assets, with the rest spread across the office and logistics sectors.
That retail focus makes management of the assets “entertaining at the moment”, says Zvi, adding that trying to sell a retail asset now, as the group is with a shopping centre in Grimsby, and achieve value is also “very difficult”.
“We’re working very hard,” Zvi adds. “The retail space is challenging, but we’re not passive, so where we’ve had challenges – we’ve had tenants come in and go out – we keep on looking at how we can adapt the assets.
“There are still retail tenants out there making a lot of money. How much rent they want to pay is a different question, but then it’s finding the right people for the right locations who will trade well and that’s ultimately what we want.
“It’s creating the right environments for them to trade well in and then it’s adapting those environments, whether it’s with leisure or whether it’s with food or events. We’re looking at all of those things and we’re looking to update.”
Capreon was still buying retail parks late last year despite the turmoil in the sector. It picked up two of Hammerson’s retail parks – Fife Central and Imperial in Bristol – for a combined £164m, reflecting a net initial yield of 7% last October.
“The opportunity there was the pricing,” Zvi says. “We paid what we thought was an appropriate price at that time in the market for assets that were of good, dominant quality with very strong occupancy and good demand and that’s proved through.”
He points out that Fife Central has no vacant units currently and the vacant units at Imperial are either now leased or under offer to tenants.
“We are fundamentally investors. If we think there is an opportunity that we can underwrite then we will,” he adds. “We haven’t bought any retail since then because we haven’t found anything with the right fundamentals. Are we scared of retail? No. We understand retail, but we’ll be very careful.”
Zvi adds that the mix of tenants is becoming ever more important, but with a lot of operators in the market it requires work to make sure that mix is right. (“You don’t want axe throwing next to your pub or soft play,” he jokes.)
Raphael adds: “We’re very opportunistic and on that [Hammerson] deal specifically, one of the key aspects was understanding whether the retail fulfilled its need in the catchment area, tenant demand and rental values.
“Those fundamentals of the assets made us feel comfortable around the income.”
He continues: “The theory is that when the market stops panicking on a capital value perspective, they’ll start looking at the fundamentals of that retail and when those fundamentals come in your yield should shift as long as your rents are right. The key thing was we thought the rents were right.”
Despite the tough retail market and stagnant office market, the family feels the future is bright for real estate. Even Brexit is not overly bothering them.
“We’ve always felt that out of a level of volatility comes opportunities,” Bloom says.
“We’ve been conscious of gearing ourselves to move quickly on certain things for quite a while now, but our horizon is longer than that.
“Brexit will fundamentally be a historic blip – an entertaining one – but in the grand scheme of the next decade it’s not what we wake up in the morning and worry about.”
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