The Valesco Group burst onto the scene this year with two core/core-plus UK office deals on behalf of Korean investors. In an interview with PropertyEU, Valesco’s founder Shiraz Jiwa reveals more about himself, his group and the approach of his partners.
Your company has been instrumental in two deals so far this year involving Korean capital. Firstly, tell us something about your background and how you came to be in real estate.
I am a mathematician by training so my attention to detail is my guiding principle and the foundation of my investor mindset. I began my career in investment banking specialising in creating value from real assets and cashflows and I developed a keen interest in alternatives, particularly real estate, whilst at Morgan Stanley. I have since closed and managed over €3 bn of European real estate investments, predominantly in the UK and Germany. Prior to launching Valesco, I was head of real estate investments at a sovereign-backed private equity firm in London.
When did you set up Valesco and what was the impetus behind it?
I set it up two years ago with a vision to build a pre-eminent European real estate private equity firm that delivers investors consistently strong risk-adjusted returns at all points within a market cycle. We aim to deliver speed and certainty to asset owners through the depth of our available capital and strength of execution, allowing us to secure sought-after assets.
It feels like it is only this year that Valesco started making a name for itself. Is that how you see it?
Absolutely. I spent the first year building out the infrastructure and on the road, closing institutional investor commitments. The second year has been about deployment. Whilst we have been particularly active in the UK, we are also sifting through a number of opportunities in mainland Europe.
In March, Valesco teamed up with Seoul-headquartered FG Asset Management in buying Cannon Bridge House in London from Blackstone for £248 mln (€278 mln) – a debut for the FG Valesco joint venture. The deal was backed by Mirae Asset Daewoo and NH Investment & Securities. What does the transaction tell us about the market and/or the approach of Valesco and its partners?
We saw an opportunity to capture value in the London commercial real estate market, particularly at the turn of the year. We exchanged contracts within 33 days on Cannon Bridge House at a NIY of 5.2%. We liked the asset quality (286,595 sq ft), tenant mix (50/50 TMT and financial services), covenant strength and WAULT of 10+ years. It’s in a prime micro location next to the new Bloomberg HQ and a stone’s throw from the Bank of England.
Then in September, Valesco hit the headlines again, partnering with Seoul’s AIP Asset Management to buy the Microsoft HQ in Reading for £100 mln, again with South Korean capital. What are your feelings about this deal?
Well, it demonstrates our ability to unlock a complex holding structure by acting quickly and having the capital available. We secured a landmark asset in a strategically important location, producing high quality income backed by an exceptional AAA covenant. The asset had been part of a wider holding structure whose underlying bonds had just matured. We approached the bondholders with deal security and speed (35 days to exchange of contracts) which allowed us to negotiate a 15% discount whilst giving the bondholders a timely exit.
Korean capital seems to be the common denominator for Valesco and its transactions. What can you explain about Korean capital and its objectives?
Indeed, we are backed by a number of high-quality Korean institutions. We share a similar investment philosophy and are aligned with their drivers and ambitions. Korean capital is drawn towards high quality income-generating assets with strong covenants combined with capital appreciation upside – essentially core/core+, all underpinned by strong real estate fundamentals. There was a perception that Korean capital is slow; clearly we have shown the reality can be very different.
How will Valesco and its partners develop over time in terms of market approach, geography and strategy?
Whilst we are currently deploying into core/core+ assets where we see value, we are actively developing investment theses within value add/opportunistic as well as private equity real estate. We are delivering a suite of products, some focussed on income and others on IRR, so as to cater to the breadth of our institutional investor base which is predominantly spread across Asia and the Middle East.
