Youth, Ambition, Profit And Tech: A Pair Of Property Vets Back New Businesses At A Moment Of Change

After leaving their roles running the UK real estate business of Canadian investment giant Fiera Capital, Alex Price and Steven Wright could have easily taken the option of retirement or nonexecutive spots on boards.

Instead, they decided on a return to the market — but with a twist on most second acts in real estate.

Rather than setting up a new venture to buy property assets, the two are building businesses, putting up their own money to back teams they think could be the next generation of profitable real estate investors.

“There's some huge structural changes going on, and at the same time, there's some really great people with really good entrepreneurial ideas, who after the last few years might not see a carry from their existing firms,” Price told Bisnow. “So I kind of figured to myself, why not go again?”

Price and Wright set up Ashen Capital, taking on roles as chief executive and managing director, respectively. Last month, they announced their first investment, backing residential development debt specialist Sibner Investment Management. 

Price talked Bisnow through the company’s strategy, how it is different from the traditional model of backing operating platforms, why it is taking the sometimes unusual step of paying the founders it invests in a salary, and why youth and technology are key to securing an investment from the company. 

Ashen met with 87 companies looking for backing over four months, Price said, and two real estate sectors dominated: companies looking to reposition office assets and those looking at residential development. 

In the commercial world, as defined benefit pension schemes continue to exit the sector, capital is set to become scarcer. In that environment, residential is by far the preferable bet, Price said.

Yet residential development is also tough right now, both for sale and for rent. Build costs and the cost of borrowing have increased, while end values have dropped even as land values have not. 

Price argued that those factors will change over time. Besides, there are still 70 million people in the UK looking to either buy their own home or rent one, meaning there are plenty of end buyers out there.

That is why residential will be a theme of the early businesses the company backs. Lending, in particular, is a less risky way to move into the residential sector given the challenges the market is facing, Price said.

Ashen acquired a stake of up to 20% in Sibner IM, a subsidiary of Sibner Group, which has a rented residential portfolio and a residential lending business. It is supporting a planned residential development debt fund that Sibner is launching by providing nonexecutive advice and governance. 

It is also in talks to invest in a land promotion business, which will look to buy land without planning permission and take it through the planning process, thus increasing the value. That strategy has been rendered more viable by the new Labour government’s relaxation of planning rules, particularly regarding “grey belt” land, Price said. 

But having seen what amounts to almost one new business every day for four months solid, a question arises: How does Ashen differentiate between companies with very similar strategies and decide which one to back? After all, as Price pointed out, Ashen’s money is not secured against assets, and if things go wrong, its investment could go to zero. 

“There's only two things we look for [at] a headline level,” Price said. “One is, will they be profitable? And the second is, do we trust them?”

A big part of the profitability question is whether a business is in the right sector. No matter how good the team, if they’re looking to invest in video rental stores, they are not going to make any money, Price said. 

Beyond that, it is about factors that are important but also intangible.

“If they are ambitious, driven, motivated people with good experience, that's the cultural alignment that we want,” Price said. “If they have the right values and standards and they've chosen an area of the market that we think makes sense, then they can be profitable.”

Ambition is important. It is hard to create that in someone who doesn’t have it, and as an investor and adviser, it is easier to pull someone back, slow them down and point out risks and challenges than it is to fire them up, Price said. 

Equally, companies need to have a clear road map of how they’re going to meet those ambitions. There is no point in saying you want to grow into a multibillion-pound REIT if you don’t know how you’re going to get there, he said. 

Ashen prefers to back younger teams, Price said, noting that as a man in his 50s, that is deeply ironic.

But, he said, younger teams tend to be more ambitious. As a company that is looking to invest on an evergreen basis instead of with a fixed-life fund, Ashen wants companies it can stay involved with for the long term rather than those where the management team might be looking to cash out. 

For the same reason, it is investing in the balance sheet of a company itself,  looking to help it grow instead of providing capital to an operating partner in a relationship that might have a fixed life, Price said. 

“In return for that risk we take, putting in half-million, a million pounds, our reputation, our knowledge, our support to get them off the ground, in the long run, we're sharing everything that they're doing,” Price said. 

“So for the first couple of years, we tend to be giving more than we're receiving. But in the longer term, if you pick the right people — and this is a 10-to-20-year business — then actually, it's much better for us to be in their business than in the deal because the deal finishes after X years.”

People are important, but so is technology, Price said. One thing that attracted Ashen to Sibner is that half of its staff are technology specialists, particularly data scientists and software engineers.

This means the company makes smarter decisions about who to lend to, it offers a better user experience for borrowers, and it can scale up more quickly than companies without good tech capabilities. 

“You need to start with that embedded in your process,” Price said. “It’s really hard to retrofit it into your supertanker at a later stage.”

If after several meetings with a team, Price and Wright think that the two sides are aligned, they seek references from those who have previously worked with or alongside a business and start the process of investing.

Unlike many investors that back businesses, Ashen does pay the management of the companies in which it invests a salary rather than leaving them to “eat what they kill,” only getting paid when they make a profit, Price said. While some risk is good, not paying a salary can create perverse incentives, he added. 

“It's not particularly a life-changing salary, but it does mean that they have enough to pay the mortgage and to just keep the wolf from the door,” Price said. “You don’t want people to be so desperate that they'll do anything to try and make a deal happen.”