Investment veterans team up on €1bn launch

If everything had gone according to plan, real estate investment veteran Gordon DuGan would now be preparing for next week’s annual MIPIM conference, ready to line up deals in the sun for his latest venture, Blackbrook Capital. But the event’s postponement as coronavirus spreads means he is instead eyeing “a bit more flying around” as he attempts to make the meetings happen away from Cannes. No matter. The former chief executive of Gramercy Property Trust and one-time head of sale-and-leaseback specialist WP Carey is used to persevering and accumulating air miles. As he met with various potential backers of Blackbrook over recent months, he says: “I had probably as many flights home from London to New York where I thought that the possibility had died as opposed to was alive.” However, with the backing of investor Eldridge Industries, the property investment firm is now very much alive, with DuGan chairing the business and Arvi Luoma, most recently WP Carey’s head of European investment, its chief executive. Less competition, more opportunity London-based Blackbrook will invest in single-tenant, net-leased properties in which occupiers pay certain operating costs alongside rent. It will also strike more traditional sale-and-leaseback deals. DuGan and Luoma expect the focus to be on industrial assets as well as healthcare and hospitality, with some office and retail thrown in for good measure. DuGan sees the net lease investment market in Europe as a prime opportunity, with “less competition, [but a] bigger market opportunity” than in the established US space. “There are 23 public net lease companies in the US with a total market cap of $180bn (£140.5bn), and you probably have another 10 private players on top of the public companies,” he says. “In Europe there are five public companies that could roughly fit in that category with a total market cap of $5bn and another five private players with a market cap of less than $5bn. And corporate owned real estate in Europe is roughly twice the size in terms of the market opportunity as it is in the US.” DuGan and Luoma last worked together about a decade ago, their time as colleagues spanning Luoma’s arrival at WP Carey in 2006 until DuGan left his chief executive post in 2010. While Luoma remained at the firm, DuGan became chief executive of Gramercy Property Trust, which was sold to Blackstone in a $7.6bn deal in 2018. Their rapport is clear. DuGan describes Luoma as his “number one choice to team with” on Blackbrook. Luoma, dialling into a call with EG from his honeymoon in Hawaii, adds that “you’re always looking for the parties you’d like to be associated with and Gordon was certainly up there” – to which DuGan cuts in to ask: “You’re saying I was top five? Top 10?” The firm’s moniker is drawn from their surnames – DuGan has Irish roots in the Gaelic word for black, Luoma is Finnish for a small river or brook. Both say the involvement of Eldridge, which is responsible for the majority of the €1bn of capital committed to the business, is key. “I’m happy to take entrepreneurial risk and take a jump like this,” Luoma says. “But only on the basis I’m comfortable with the capital we’ve got behind us and, more importantly, the people behind the capital behind us.” European DNA DuGan and Luoma have so far made three hires in the firm’s offices in St James’s, SW1, with further appointments planned. DuGan is likely to be visiting London from New York regularly, but don’t expect him to bring many new joiners across the Atlantic with him. “American investors especially, their approach to Europe is to send two acquisition guys from Chicago or New York, who rent flats in Chelsea and get some office space,” he says. “It’s important that our approach, our DNA, is going to be European. The team is going to be European, despite my accent. That’s a commitment. That’s a successful culture we built at WP Carey and one that we’re going to carry over here. This is not an American-run business.” Once London is up and running, DuGan and Luoma may look further afield. “Our hope is as the portfolio grows, we may look for a continental European office to complement [London], whether it’s Amsterdam or Berlin or some other market,” DuGan says. For now, though, it will be a case of hitting the phones and booking some flights to get the early deals rolling in. And although MIPIM is postponed, DuGan is hopeful this could help him hold some more productive meetings. “They’ll probably be less distracted, frankly,” he says of his industry contacts no longer heading to drink rosé on the Riviera. “And less hungover.” To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette