Meet Nick Weber: From Working Out Of Starbucks To A $3.3B Portfolio In 2 Years
First-time funds from new managers aren’t really supposed to go like this.
In a globalised sector we are told that scale for fund managers is key, and each year the big names in the industry gobble up a bigger and bigger portion of the capital available. The field for smaller fund managers is shrinking, the data shows, and for new firms, it is even tougher.
But Henderson Park Capital is bucking that trend. Set up by former Goldman Sachs and Mount Kellett partner Nick Weber in 2016, it raised $500M of equity before Weber even had an office or a printer. It supplemented that to complete a reported $970M first close in 2017, and last week it was reported the firm has raked in further equity, taking the fund size to $1.6B, plus a further $600M of co-investment capital.
And in a world where investors are increasingly wary about record high asset prices and the potential end of the cycle, the value-add investor has not been shy about putting that capital to work. It has completed 13 deals with a reported gross value once developments are completed of $3.3B, with $1.4B of equity deployed. Many of those deals have been in markets where value-add investors have been less prominent recently, like London offices and build-to-rent schemes, and Paris hotels.
Weber talked Bisnow through the firm’s strategy, including the thinking behind its London investments and how it sources deals in an expensive market.
Meet The Phoenix
Henderson Park’s genesis is something of a phoenix from the ashes tale. Mount Kellett was set up in 2008 by a group of former Goldman partners looking to buy distressed assets in many sectors of the economy in the wake of the financial crisis. Things did not go to plan.
A series of disastrous investments in the energy sector hurt the returns on its funds and hindered its ability to raise capital, and it was essentially taken over by Fortress in 2015.
But Weber’s European real estate team had been extremely profitable, making a reported 27% internal rate of return and $1B profit from distressed debt and equity investments. After a period on the sidelines, he used this track record to start a new business.
“My wife reminded me that I married her for life, not for lunch,” he said with a laugh. “I was getting in her way around the house, probably cooking a fry up, and she had friends coming over, so she made me have a shave and kicked me out of the house, told me to go and do something. And I missed the challenge of building a team and doing deals.”
Henderson Park at this point was nothing more than one man with a plan. But he tapped investors from his previous firms — 2 Stonepoint Capital and the Kuwaiti Investment Authority were among the investors to provide that initial $500M commitment.
“When I started the business I didn’t have an office or a team or even a printer, I just had a piece of paper with those initial commitments,” Weber said. “In 2016 I moved out of Starbucks and hired 20 people and did three deals.” The team today has 27 people.
Those deals were not small steps either. The first was the €365M purchase of the 1,025-room Meridien Etoile, the largest hotel in Paris. As an American whose first language is French, having been educated at a French school in the U.S., it was an apt first deal.
Weber said a big part of his firm’s success in deploying capital has been its ability to source off-market deals.
“A lot of other big global investors aren’t really slowing down in the current market,” he said. “We’ve been extremely careful and we’ve not rushed in. We’ve bought 13 assets in capital cities, mainly London, Paris and Madrid. We’re focussing on buying assets in great locations with conservative leverage, and we are focussing on situations where maybe a sales process is broken, or we can work with a great operating partner, or we have an angle that maybe other people didn’t see.”
Examples include Athene Place, where deals for the 147K SF office building had fallen out of bed twice before Henderson Park bought it in June this year. Vendor Commerzreal had originally wanted £120M for the building, but Henderson Park paid £101M.
“We weren’t really looking at London offices at first, but then in the aftermath of the Brexit vote we began to find opportunities to step in to situations where assets had failed to sell once, or even twice,” Weber said.
The building was vacant, with Deloitte having left earlier in the year, but in November Henderson Park leased 75K SF to Deloitte’s digital team for 15 years. It will now be refurbished.
Its £500M deal for two other huge hotels, the Hilton Metropole London and Birmingham Metropole, is another example. Investors including London & Regional had been under offer to buy the hotels from owner Tonstate for as much as £600M before deals for them were pulled. This year it bought the Westin Paris-Vendôme from GIC in a sales process that had previously stalled, and is working up plans for a redevelopment.
The firm is also helped by the fact that it occupies a fairly unique niche in the value-add investment world: smaller than the giants like Blackstone or Brookfield, different in focus to firms like Starwood or Cerberus, and more focussed on large deals than similar-sized peers like Orion or Patron Capital.
“There aren’t that many people that will write a €100M-plus equity cheque, he said. “There are some obvious names out there but they are all doing slightly different things and have their own focus. Only a relatively small number can buy a €300M-€400M building or do a deal of that scale, so when we look at these larger transactions there is not as much competition, which presents opportunities.”
Another area where Henderson Park has ventured, in contrast to most value-add investors, is the London build-to-rent market, which in general is dominated by more risk-averse institutional investors.
It is the funding partner for the world’s tallest modular residential towers, which are being developed by Greystar in Croydon and have 550 apartments. In 2017 it teamed up with the same investor to buy a portfolio of 172 units from house builder Barratt for £140M. Weber said the firm has a portfolio of around 2,000 units that are either built or under development, although he declined to say which other schemes it is funding.
“We’ve been able to buy at prices that are maybe 25-30% below pre-Brexit levels, which is pretty low on a per square foot basis and we’re also developing PRS [private rented sector] in an around London,” he said. “You are hoping for a bit of rental growth — you don’t want to bet on a lot, but in some areas of the U.S., professionally managed multifamily assets have shown compounded annual rental growth of up to 8%. These kind of assets are going to trade at pretty low cap rates, and the better portfolios in Central London will be highly liquid.”
What next for Henderson Park? There is the new equity from the fund to deploy, and like all good private equity firms today it is potentially weighing setting up a core plus investment business.
In spite of the rapid rate of success for the firm, Weber is keen to stress it has not been easy.
“I was lucky enough that the first four people I spoke to, who I knew from my previous ventures, all wanted to do something,” he said. “But it wasn’t easy. I’m humbled and super grateful to all of our investors. I had to take hundreds of meetings to get to the point we are at today. When I spoke to those early seed investors I didn’t have a whole lot, and they had to see through the fog and see that this little team of five or six people at Mount Kellett had built a profitable business in Europe.”