Leo Noé is one of an increasingly rare breed. An instinctive, straight-talking investor who makes his own decisions and is a far cry from the way many of the institutionalised players who dominate property go about their business.
That is perhaps why he now finds himself liberated as the head of a more autonomous business rather than under the auspices of Bank of Montreal-owned BMO Real Estate Partners, from which he sold out in March (see box below).
“There is a family atmosphere here,” he says. “You can worry about someone having a toothache here and you couldn’t at BMO. You can let them go to the dentist and not book it down on the holiday chart.
“If you have 45,000 employees you have to have a process, but I hate being process-driven,” he says. He certainly seems in a happier place now.
“Look at my face,” he says, smiling from ear to ear.
The exit from BMO saw Noé take back the management of assets owned by the family as well as the value-add mandates or club deals raised and structured by Noé and co-mingled with Noé interests.
The Noé Group now comprises Goldacre, its private equity business founded four years ago and headed by David Bloom, and Capreon, its newly established property business.
The company has £2bn of assets under management and the Noé family owns just under half of the total equity. The remaining equity is held by private equity groups, institutional investors and family offices from the likes of South America, Turkey and the US.
Around £1.3bn of the portfolio is in the UK, with £350m in Germany (where BMO continues to manage interests for Noé) and the remainder is in Benelux, Israel and India.
The new chapter of the Noé story will see Leo relinquish more control to the next generation as they plan to grow the business further under in its unshackled structure. This will see it enter uncharted territory internationally and continue on its value-add heritage while trying to learn from having been burnt in the downturn.
A family man
There is a striking warmth to Noé and he oozes with pride sat alongside his two sons and protégés who are taking the front seats at Capreon. Zvi is heading the UK and Raphael, or RA, is charged with growing the international business.
“The pleasure I get coming into the office is nothing to do with personal ambitions to create, but for the children to create,” he says. “I have the pleasure of coming in here and seeing them working together, working with me and occasionally asking for my advice, that’s what it’s all about.
“Whether they take it or not is a different matter. In 30 years’ time I’ve asked them to keep bringing me in every day and to come into my office and pretend to ask me for advice and then leave pretending they have taken it. And when I get old and my trousers come up to here, to buy me a new suit even if I say I don’t want one.”
It sounds gross, but (I lost) more money than most people could even consider. But I didn’t have any sleepless nights over it. It doesn’t matter.
The looks on Zvi and Raphael’s faces are of great admiration and endearment with just the slightest twinge of embarrassment; that look only a child can have for their parents.
Raphael is fresh to working with the family, having joined after almost six years in the European acquisitions team at Ares Management. Zvi, on the other hand, worked alongside his father for a decade at BMO and its predecessors, F&C REIT and REIT Asset Management.
He previously worked under the company’s trusted adviser Franco Sidoli, now executive director at CBRE and then founding partner of Franc Warwick.
“In truth, they have a better eye than I do because often I will have a piece of real estate or a business which I’ve looked after for 10-15 years and you feel attached. They will come along and say: ‘Sorry, you really don’t need this, get rid.’ They don’t have that attachment to its profits or losses and I’m often better off listening to them,” Leo says.
Old habits die hard though. Jewish investors such as the Noés are often associated with trading and aggressive asset management rather than more conservative, core strategies and, for the family, sitting on their hands is not a natural instinct.
Raphael recalls: “When we had our first proper sit-down on the business, I had put together a paper outlining where I though the market was and concluded that in that context, as a family, we have no urgent need to put out capital. He [Leo] said: ‘I agree with everything you’ve said. Right, what are we going to buy?’”
Leo adds: “I think it is true that it is a trait of Jewish investors and it is even more so the case with my family, with my parents being Holocaust survivors.
“They could have spent all their time looking over their shoulders and they would have achieved nothing, but they didn’t, they looked forwards. That’s what the Jews generally do. I do the same. That’s why having my children here is so huge – because that is looking forward.”
“We are a very bad passive investor,” says Zvi. “We like to be active, buy assets we can reposition where there is asset management work to do, moving tenants around, tidying things up. We like to be active and like to feel we have an element of control in our own destiny so we can improve things through hard work and positioning it better.”
The patriarch’s approach has served him well. After all, he was ranked 245th on this year’s Sunday Times Rich List, with an estimated fortune of more than £500m. However, there is no doubting his exposure to secondary assets and high levels of gearing saw him endure a torrid recession, with hundreds of millions of pounds of assets entering insolvency procedures.
“It sounds gross, but it was more money than most people could even consider,” he says. “But I didn’t have any sleepless nights over it. It doesn’t matter. It’s like when the kids ask: ‘How much are you worth?’ It doesn’t make any difference. I don’t want to know. If I’m worth more than I think, it gives me a swollen head and if it’s less than I think, I get upset. There’s not much point,” he says.
“It was a lot of money, but thank God we have still got enough to eat tomorrow morning. We have still got enough to have a business and I still pinch myself every morning.”
Learning from the past
While many borrowers chucked their keys back to banks once they saw their equity wiped out, Leo says he made the mistake of trying to hold on for too long, pumping more equity into deals and throwing good money after bad.
“I was trying to do the honourable thing,” he says. “My name has three letters and each one is worth a huge amount – I have spent 30 years building it up and you can lose it in seconds. Honour played a very important part in it. Do I regret it? No, I don’t because I could look myself in the mirror.
“The only one thing I regret is buying something in August 2007 when I knew we were going into recession. Because I had given my word I went ahead and exchanged contracts knowing I shouldn’t have done it. I have always acted honourably but people always try and shit on you.”
Leo says he has tempered his investment approach somewhat in recent years.
The family is taking on more conservative levels of debt than it was pre-crash, putting more stress on ensuring surplus income is generated to cover interest and being wary of loan covenant restrictions that have the potential to lead to a loss of control.
“I’m not as much of a deal junkie as I was… I don’t think you can learn from it vicariously – I think you have to suffer it. We have all been through different things. RA is the only one who hasn’t suffered as he started in the middle of the recession, but hopefully there are enough of us here who have been tested and know what to do.”
My name has three letters and each one is worth a huge amount – I have spent 30 years building it up and you can lose it in seconds.
The Capreon business will look to grow by putting together clubs of investors into deals, with Noé typically being a co-investor of 10-50%, although this can go up to 100%.
In the UK, the company is known for its background in retail, something it will not shy away from entirely, despite the troubles in the sector.
Zvi says: “Structurally, retail is changing and in centres we are looking to rebase those with new leisure anchors.
“We have invested heavily in retail warehousing in the past few years as we have found pricing slightly softer and you can buy where rents are affordable and tenants are trading well. You can underwrite those and make nice income returns.”
Internationally, the Netherlands and Italy are expected to be two of the most immediate target areas.
Raphael says: “At Ares we saw a huge wall of money chasing European real estate. I am looking to be ahead of capital flows.
“In the Netherlands there is a huge arbitrage between prime Amsterdam and everything else and I believe there are opportunities as a result.
“Italy is an inefficient, non-transparent market where there are €80bn of non-performing loans to come. There are opportunities in aggregation too if you can compile and sell a package of more than €200m.”
In Zvi, and in particular Raphael, there appears to be an edge to the Noé business that compliments the larger-than-life character and will of their father. There is a blend of youth and experience, a calculated private equity eye and gut instinct.
Within the Noé family, times are changing and it appears that Leo is ready to listen to his sons’ decisions.
“You can try and run a business as autocratically as you like, but you have to listen to people and discuss things. As my father once said: ‘If three people tell you you’re drunk, go and lie down.’”
The genesis and evolution of the Noé Group
The parents of Leo Noé were Holocaust survivors who fled to England from Eastern Europe after World War II. His father became a successful diamond trader and with the proceeds he became an even more successful property investor.
Much of the portfolio was reversed into a listed company in 1989 called Bourne End Properties, of which Noé was chief executive. The Noé interest was steadily realised and he stepped down in 1997.
In the meantime, in 1994 REIT Asset Management was established alongside Kevin McGrath, Ivor Smith and Martin Sheppard to manage Noé interests aside from those within Bourne End, as well as mange third-party equity that was invested alongside Noé cash.
In 2008, REIT Asset Management agreed a sale to F&C Asset Management and to merge into its property business to create F&C REIT. This introduced more institutional clients to the business, such as Friends Provident, but it also continued to manage value-add investment strategies, much of which were backed by Noé family money.
In 2014, F&C REIT’s parent F&C Investments was taken over by BMO Global Asset Management, which is owned by Bank of Montreal, but this had little direct impact on European property assets under management. The real estate business was rebranded BMO Real Estate Partners.
In March, Noé and Ivor Smith sold their combined 30% stake in BMO REP to BMO, which handed back the management of Noé interests, as well as the management of value-add interests raised and structured by Noé. These have been taken on by the new Noé property business, Capreon.