Prestbury Investments chairman Nick Leslau has had a phenomenal year by anyone’s standards. Secure Income REIT was the strongest performing REIT of 2016, he has been extremely bullish over Brexit and as well as continuing to influence the market, he has backed new influencer Savannah de Savary. Property Week asked him what the secrets of his success are.
I am genuinely surprised, humbled and proud all at the same time.
In this world of zero interest rates, everyone is seeking high quality growing income returns and, with its super long leases to outstanding credits with guaranteed annual uplifts, SIR delivers significant growing dividends plus great capital returns.
While not the most exciting property story in today’s fragile political and economic environment, 11% pa forecast total returns for the foreseeable future seems pretty attractive to me.
Boring is for sure the new exciting.
I am very angry indeed with the Conservative leadership. One minute our focus was on the terms of our Brexit, of which I was a huge fan, and now we are looking over our shoulders at an economically illiterate Marxist opposition party headed by arguably the most powerful and scary man in Westminster, who at many levels threatens the future of this country.
The throne was gifted to him by an arrogant, complacent and ultimately hopeless Conservative leadership. If the opposition becomes government the economic consequences of Brexit will become an irrelevance as we turn the UK’s political and economic clock back 40 years.
Ambition and fear. As odd as this will seem I do still worry that something might happen completely out of left field which may result in me and my family having to move back to a bedsit in West Hampstead or maybe even abroad.
My antecedents in pre Nazi Germany were more integrated and successful than UK Jews are today and yet what happened to them in such a short time is utterly beyond our comprehension, but it is very firmly imprinted in my DNA, which may account for my somewhat irrational fears.
It’s a much more empirical and commoditised business than when I started and because I was never very good at maths, I probably would have stayed clear of it. Today’s property person is much more analytical and less intuitive and the opportunities to be entrepreneurial are less but, if I was going to start out again just as I did the first time, I would want a Franco Sidoli and Nigel Wray by my side to do it with all over again.
Property is a very capital hungry business and so if you are going for the investment side of the game then align yourself to a company that has significant financial resources or you will be very bored. On the service side, agency roles, especially for lower value property and leasing, are slowly disappearing and within 10 years will barely exist, so aim for sectors and professional services spaces where there is a genuine future.
As the largest asset class on the planet, there will always be areas in which you can develop an expertise and so I would encourage anyone coming into the business to try it all and then find one area you really like and then become the very best at it.
Savannah is on a land grab and I want to be a part of the grab. Even more importantly though is Savannah herself.
She is just 24, gutsy, a hustler, super bright, modest and on a mission. That ticks my investment boxes.
Have way more girls in it. The lack of females in property is frustrating and I don’t get it. Property is such a male-dominated business and that’s a shame because the opportunities for women in property are huge. When we recruit I am always disappointed by the lack of female applicants. I know the RICS go into schools to recruit but, dare I say this, perhaps they are sending in the wrong people.
Compared to when I was banging the lack of corporate disclosure drum with Norma Cohen when she was property correspondent of the FT in the early noughties and really irritating all the large quoted property company boards, I think our real estate world has cleaned up its act hugely. Disclosure is so much better and reputationally, property has improved. I do, however, think we are hopeless at telling the story of how, as the largest asset class on the planet, we are also directly and indirectly one of the biggest employers and we need to shout this louder and make sure we are heard.
People seem to think wealth creation is a bad thing. We create jobs and we make society richer so it can afford to be increasingly benign and generous too those who can’t afford it, but without wealth creation we have nothing to give away. This is how society is fuelled yet we don’t teach it in schools, we don’t talk about it and we certainly don’t do a good job of trying to make government understand the concept, whatever its colour. As a huge industry we need stick our heads above the parapet more and be enormously proud of what we do and get others to understand how interference, such as we saw recently with SDLT, has a dramatic multiplier effect on the economy as a whole.
For the moment, high quality real estate and very long term sustainable income streams will be relatively safe, but for the rest of the market the rate of decline has just increased. Little is likely to fall off a cliff because of low interest rates and the significant amounts of cash still looking for a home. I have no sense at all of the catalyst that will make values increase, so I think total returns for this year will be very disappointing and in very isolated areas the growth will be anaemic if you’re lucky.
One of the joys of being agnostic in terms of in what and where we can invest as opposed to being sector specialists is that our hunting grounds are enormous. Our aspiration for SIR is to make a lot of money for our shareholders, responsibly, conservatively and to never be scared NOT to do deals. I have learnt that sometimes the very best deals are the ones you don’t do.
As for Prestbury, I am honoured to work with some of the very best brains in the business and have done for a long time. Sandy Gumm, Mike Brown, Tim Evans and Ben Walford, my Prestbury partners, are so much smarter than me in so many ways. Surrounding myself with such clever people makes my life more stimulating and their constant challenging makes me a deeper thinker and I hope a better property person and I aspire to keep us together and busy.
The political and economic uncertainty is a nightmare for all. The prospect of a Labour government in its current form is quite frankly unthinkable and I have yet to grasp what that means not just for property but for this country. Mercifully, this is happening at a time when there is low debt levels real estate and much of the equity capital in the markets is ’sticky’ but when sentiment turns it can do so quickly. It’s time to batten down the hatches and be very patient.
If the rate of decline in value of all but the best quality assets increases then there will be some who panic, there always are, and perhaps there will be some opportunities which will favour the brave… and the deep pocketed.
Don’t panic. Nothing good ever came out of panicking. Batten down the hatches and sit tight for what is going to be a long ride, which will test your patience but with 8% frictional dealing costs there would have to be a very good reason to change the path you are on at the moment.
At Saracens we have four rules by which we want to live our lives, which are visible all over our stadium: ‘Discipline, humility, hard work and honesty’. I love these messages, but they are only words. Saying and doing are very different things. I strive to do them even though I know I often fail.
20 July 2017
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