In her first official interview since taking up the role of CIO at Patrizia Immobilien last year, Anne Kavanagh talks to PropertyEU Magazine about the recent Rockspring takeover and how her move to Europe's most acquisitive property firm came about.
Anne Kavanagh breezes back into Patrizia Immobilien’s London office in typical energetic style. It is 4pm on Thursday, 4 January, and she is running a few minutes behind after a meeting. No prizes for guessing from where she has just returned: the HQ of Rockspring Property Investment Managers, the €7.8 bn firm that Patrizia is taking over under the bombshell deal that hit the market in December and which Kavanagh as Patrizia’s CIO had a lot to do with.
The timing of Kavanagh’s first official interview since leaving AXA Real Assets to join Germany’s Patrizia nine months ago as chief investment officer could hardly be better. Not only has the Rockspring deal just been announced, but it rounded off a phenomenal last four months for the company during which time it suddenly became a top 10 Europe real estate manager with around €38 bn AUM following two other corporate deals: the takeover of Copenhagen-based global fund of funds business Sparinvest Property Investors (SPI) in September 2017, followed closely by the acquisition of fellow German property company Triuva announced in November.
Kavanagh’s arrival at Patrizia in April 2017 has been in part explosive and in part fortuitous. ‘It’s been extraordinary,’ she says. ‘I spoke to Wolfgang (Egger – Patrizia’s founder, ed.) between Christmas and New Year’s Eve and said: ‘Gosh, when I came I never would have imagined we would have bought three businesses and be in the position we are currently in!’
This interview appears in the January/February 2018 edition of PropertyEU Magazine
EDUCATION BACKGROUND
The same can perhaps be said for Kavanagh and her career. She was brought up in a large Catholic family, the youngest of six siblings. Her father is a retired headmaster who at 93 years old remains a ‘strong personality’ and the patriarch of the family. And it is education that runs deep through her family. Each of her three sisters – the eldest of the siblings – followed their father into education, so for the youngest, Anne, to decide on a career in property was hardly an obvious choice.
‘There was nothing in my background to suggest real estate as a career, but you could say I learned my negotiating skills from being one of six children!’ she jokes.
She doesn’t recall thinking about her career at a young age, and even today refuses to believe real estate was the only thing she could have done. ‘I still believe there are 20 other things I could have gone out and become. But for me, it is the people aspect of real estate that I love and the built environment.’
She continues: ‘Being the youngest, by the time I was choosing what to do, perhaps there wasn’t the same pressure to choose maths, physics or chemistry to become, say, a doctor. When I came up with this idea of real estate, my father said: “Oh, that’s business. I don’t know anything about that.”’ But he fixed for his daughter to see a family friend who did, and that was it.
As a graduate in 1983 at Jones Lang Wootton in London, she did the classic thing of working her way through different departments. At one stage, she co-led London West End investments and later took on a European role. After 12 successful years, she eventually left the comfort of a large successful property agency for a less predictable firm, the hedge fund Cambridge Place Investment Management founded by finance entrepreneur Martin Finegold where she worked in the property team.
It was at Cambridge that she first worked with Dennis Lopez, with whom she would later reunite at AXA Investment Managers. Unfortunately for the real estate team though, Cambridge as a hedge fund lost terribly after big bets on US subprime mortgages. It lost around $1.2 bn.
Kavanagh susbsequently moved to investment bank Lazard before joining AXA in 2010 for what was to become her most senior role yet – global head of asset management and transactions, which she held until February 2017.
And then she got the chance to move to Patrizia, which had begun in 1984 as a residential property company and listed in Frankfurt in 2006. Speaking of her move from AXA to Patrizia, Kavanagh says she wasn’t even looking for a change. ‘I was very happy and enjoying my time at AXA and not planning on moving. I had an approach, but said I was too busy! It was classic really, It was presented as: “You want to do some more residential, don’t you? And in the worst-case scenario, if you meet them you might do some business together”. So, I went along to Patrizia on the basis of making a new contract. Wolfgang said he had been tracking progress at AXA and was interested in the transformation there, and so we started to talk. AXA had really grown the business coming out of the 2008 financial crisis and Wolfgang had expanded from Augsburg in Germany to opening other offices, hiring country heads, and taking the group from being a German business to being European, and he said the company was now looking for the next stage of the evolution. He said they were looking to hire an experienced CIO with international experience. And he said, “With your experience, we could do amazing things together.”’
Amazing indeed, because thanks to Kavanagh’s relationships, the Rockspring transaction materialised as a real possibility. When she arrived at Patrizia, she was told Rockspring was one of the potential companies on Patrizia’s buy list. Kavanagh had known both Richard Plummer, Rockspring’s founder, and Robert Gilchrest, the current CEO, for over 20 years. ‘I said I knew the business really well and that I knew the founder and the current CEO. When I was an advisor, I used to go and present on the market to their investors, and Richard Plummer would always invite me to dinner in whichever city they happened to be in. I have done business with them both, so there was a long history, and of course, I knew about their culture and values.’
SIMILAR VALUES
When Patrizia’s founder asked Kavanagh if she thought Rockspring would be a good fit, she was certain. ‘I said yes because they share the same values, they look after their investors and they have wanted to stay entrepreneurial.’
There were also similarities, because Egger had set up Patrizia in 1984, the same year as Rockspring. Kavanagh recalls calling Rockspring’s CEO, Gilchrest. He told Kavanagh he had been meaning to call her because he was intrigued by her move to Patrizia. Kavanagh told him all about the company’s aspirations. ‘I said: “Have you met Wolfgang?” And when Wolfgang and I had lunch with Robert (Gilchrest) just before the summer, we got into conversation about the history of the two businesses and there were so many similarities. It was uncanny. There was a really good fit right from the beginning.’
The rest, as they say, is history. The Rockspring deal will go down as another feather in the cap of deal-making. Those that know Kavanagh say she has done phenomenally well to get to where she has in her career. They admire her ascent over a lengthy career, all while bringing up three children. Some say her obvious strength is her experience, her people skills, and character. When asked what she thinks others would say about her, she offers this: ‘I hope they would say I have spent my whole career doing deals and a lot of repeat business with people.’
LEVERAGING CONTACTS
This is the recurring theme with Kavanagh – people. ‘Real estate is a people industry – a very friendly one,’ she says. ‘I have had phenomenal people I have worked for and with and that I have learned from.’
They include John Stephen, who retired as chairman of Jones Lang LaSalle’s English business in 2009; Robin Broadhurst, who retired as European chairman at the same firm at the end of 2003; Lynn Thurber, chairman of LaSalle Investment Management and past president of the Urban Land Institute; and Pierre Vaquier, who left AXA IM Real Assets as CEO in 2017 after 23 years with the business.
She continues: ‘You get to a point in our industry where you are leveraging your contacts and network to do great business. As you become more experienced, it doesn’t become hard work, it’s easy. I feel now that I am a stage of my career where I am bringing all of my experience of 30 years to my day job, which is a privilege and a pleasure.’
When it comes to doing deals, she comes from the school of ensuring everyone gets something out of it, and has no truck with short-termism attitudes of getting one over someone. ‘I think there is a real art to getting a good deal and both sides being happy,’ she says. ‘That was a really funny thing with the Rockspring deal because the moment we had signed, we knew we would be colleagues. It was the same with the SPI transaction, negotiating across the table but knowing in the future we were going to be working together. That’s a different one from buying a property, but the principles are the same. When I was at AXA putting together a lot of club deals, we pulled together investors from different parts of the world. You are listening to them and aligning interests and you are making it happen, you are solving problems. I suppose I have spent my whole career being relationship-led.’
Addressing Patrizia and its sudden size, she says ‘size is not value itself. A trend we see is that institutional investors increasingly want services from a single source. They want a partner who advises them, without promoting a single specific product but with whom they can invest in Germany as well as in, say, the UK or France, whether it be commercial or residential property’.
She adds: ‘In addition, successful investment managers should take on the management of the property and report to investors in a format they are used to in their native country.’
But isn’t Patrizia becoming bigger at a time when real estate returns, if anything, are shrinking? Kavanagh refutes that general premise, saying the returns are there if the right strategy is implemented. For things to go right, a company needs local people on the ground, which Patrizia certainly has many of after its three acquisitions. It has 941 people now.
ANALYSING DATA
Kavanagh adds it is equally important to understand ‘stories behind the data’ to come up with the best ideas, not only by analysing data at country level but at a regional and local level too. Then one needs to tailor a product to clients’ needs and once assets are employed, use asset management to extract more value.
Asked where value can be found in Europe now, she points to four main areas: pan-European residential Build-to-Rent; pan-European value-add; pan-European residential core property; and Dutch senior living.
Patrizia still believes in taking development risk. Indeed, the company just won a $1 bn mandate from a sovereign wealth fund to invest in development. As Patrizia goes about integrating the three companies it has acquired, programmes and strategies will become even clearer. Kavanagh says the market can expect the company to be a very active trader in 2018. The Rockspring transaction she had such a big part in generating should help the company do just that. If all goes well, it will become another major feather in Kavanagh’s cap.
PERSONAL PROFILE
Anne Kavanagh took up the role of chief investment officer (CIO) at Patrizia Immobilien in April 2017, based in London. She previously worked at AXA IMRA as global head of asset management & transactions, a role she held for seven years. Prior to that she worked for investment bank Lazard, hedge fund Cambridge Place Investment Management and adviser Jones Lang Wootton.
COMPANY PROFILE
Patrizia Immobilien was established in 1984 as a residential property company by Wolfgang Egger and listed on Frankfurt’s stock exchange in 2006. It has a track record of acquiring companies. It bought Hamburg-based LM Immo Invest eight years ago, London-based Tamar Capital five years ago, and Copenhagen-based fund of funds business Sparinvest Property Invest in September 2017. Since then it has announced the takeover of Frankfurt-based pan-European manager Triuva and London’s Rockspring Property Investment Managers. Patrizia’s total AUM is €38.3 bn.
