Profile: UBS’s Fergus Horrobin

Fergus Horrobin has confidence in China. Earlier this year, UBS’s Hong Kong-based global head of real estate played a key role in selling the bank’s London stainless steel-clad headquarters, 5 Broadgate, EC2, to a company founded by Hong Kong property tycoon Li Ka-shing. The Li Family Trust bought the 13-storey building through CK Asset Holdings in June for £1bn. UBS advised joint sellers British Land and Singaporean sovereign fund GIC on the deal. Meanwhile, in 2017, Horrobin brokered one of the largest real estate deals in Europe for China’s sovereign wealth fund. UBS advised China’s CIC on its €12.2bn (£11.1bn) acquisition of Blackstone’s industrial business Logicor. And he hopes these deals will continue to characterise his career. [caption id="attachment_888208" align="alignnone" width="847"] 5 Broadgate, EC2 –sold for £1bn in June.[/caption] “I want to be part of the bridge that brings international and Asian capital in particular to European real estate transactions,” he says. Horrobin also wants to see more European property developers learn from their Asian peers. Sitting in a boardroom in the middle of the 4.7m sq ft Broadgate campus, he says his surroundings are “emblematic” of what should be happening in major cities. “That integrated campus approach I think is where major cities need to go. It is something I think Hong Kong has done extremely well. Select developers like British Land [owner of Broadgate campus in partnership with GIC] are doing this well here in London, and I think others will copy. “The Hong Kong property developers really are the gold standard in terms of large integrated mixed-use development.” China calling Horrobin is bullish on China as a lead outbound investor. Having led franchises for UBS in Australasia and Europe, he became global head of the real estate, leisure and lodging sector in 2011. That year, he decided to leave London. “The big shift has been since I moved to Hong Kong. Basically, I was taking a view that the bridge between Asia and the rest of the developed world, from an investment banking perspective, would become more important. “The market cap of Asian real estate companies is vast and growing. The largest market in the world is still the US, but I think China will take over quite quickly. European real estate companies are generally small compared with their international peers.” Many of China’s largest real estate groups are state-owned, including China Overseas Land and Investment, which has a market capitalisation of around HK$260bn (£26bn). “Unlike the West, where large pools of assets are found in middle-class saving vehicles, in the East most capital is still held by governments or high-net-worth individuals or families. [caption id="attachment_882599" align="alignnone" width="847"] The Cheesegrater, EC3 – sold to CC Land earlier this year.[/caption] “We have a lot of high-net-worth Asian family clients who made their money in something else and ended up in real estate. And so there’s a constant desire to be fed information about market opportunities. When these individuals become wealthy, they tend to distribute their investment disproportionately towards real estate.” Some have only recently entered the UK market. CC Land made its debut in the country in January last year with the £292m acquisition of One Kingdom Street, W2, from TH Real Estate. Four months later, it sealed the deal to buy the Leadenhall Building, EC3 – known as The Cheesegrater. “When I heard Hong Kong’s CC Land was becoming active in the London market, I spoke to [deputy chairman] Dickie Wong a few days later.” Against a backdrop of rising demand, UBS’s real estate investment banking teams in Asia are earmarked for growth. “Our presence in China is getting larger. We have teams in Tokyo, Hong Kong and Beijing, but it is the China capital that is the key area of growth for us.” Wealth management crown Currently, UBS’s real estate investment banking team consists of around 60 people globally and the bank regularly tops the charts in the wealth management stakes. Last year, it maintained its lead with a $6.4bn (£5bn) brand value, with Wells Fargo and Merrill Lynch in second and third place respectively, according to consultant Brand Finance. Horrobin says that this strong branding has contributed to the bank’s success in the region. UBS has three divisions: wealth management, asset management and investment banking. “We have a large wealth management franchise, so it is a very natural market for us. We have hundreds of boots on ground talking to those high-net-worth individuals. Those families are our source of assets.” What about potential conflicts between the real estate investment banking department and the wealth management arm? Horrobin says: “It is managed. “We speak whenever we can but it is managed quite independently,” he adds. “Our closest connectivity is with the wealth management side of the business.” Brexit impact So will Chinese capital continue to flow into London property, despite the UK’s impending exit from the EU? Horrobin says: “I think Brexit is definitely a concern but people don’t really know how much of a threat it is. Certainly when we were selling this building [5 Broadgate] it came up a lot as a topic but if you look at what’s actually happening, we have committed to this building until 2034.” He adds that London is likely to remain Europe’s most prominent financial centre after March 2019. “You can actually get a lot more done across Europe sitting in London than you can across Asia sitting in Hong Kong. For every single deal you do in Asia, there is another currency, another set of rules, it is always different. “Even if London loses some passporting rights, it won’t lose the benefits of having a critical mass of people with a common currency.” It remains to be seen whether Chinese exuberance about London property will be dampened in a post-Brexit Britain. But for Horrobin, building relationships with China’s real estate players is a long game. The Fergus Horrobin story Born in Australia, Horrobin is UBS man and boy having joined the bank in Sydney in 1995. During a two-week internship with the company, the now chief executive of Stockland, Mark Steinart, offered him a one-day-a-week stint while at university which turned into a permanent role when he graduated. Horrobin’s wife is also a real estate guru. She headed real estate research at UBS for more than 20 years, but has just left to become head of listed real estate investments at CPPIB. The first phase of his career saw Horrobin chart the rise of the real estate investment trust regime, from Australia, through to Asia and London. He says he was “lucky” to join a team at UBS in Sydney that “got onto that early”. Over the ensuing decade, as the nascent sector grew from less than A$10bn (£5.7bn) to more than A$100bn, he says he was involved with raising about 60% of that capital. In the early 2000s he set up REIT teams for UBS in Tokyo and Singapore. By 2007, when he relocated to London, the UK was on the brink of introducing its own REIT regime, as were multiple other European countries. Quick-fire questions: ■ What keeps you up at night?  Identifying the further drivers of growth. ■ What’s your career mantra?  “Start it low, watch it go”. Particularly for capital market exits, it is important to start at a level that lets competitive tension facilitate price discovery. ■ Favourite London area?  Twickenham – I love the craziness of having a major stadium in the suburbs. ■ Top London restaurants?  I stay close to the City and the casual dining around there has really taken off.  We have Som Saa, Smoking Goat, Yautcha, Kricket, Oklava – all fantastic. Horrobin’s other growth bets Ireland [caption id="attachment_935225" align="aligncenter" width="847"] Google has committed to a major occupational deal in Ireland. Image © M.ASTAR/SIPA/REX/Shutterstock[/caption] Some of the world’s biggest tech companies such as Google and LinkedIn are committing to major occupational deals while the investment market is also seeing strong volumes. Ireland has been heralded as a growth story, but is it sustainable? Horrobin says: “That’s a great macro story at the moment because it’s been relatively capital starved. Also, whereas the prior boom and crash in Ireland was leverage driven, this boom is much more fundamentals driven. Net emigration has turned it into net immigration and foreign direct investment has increased substantially.” Continental Europe takeovers UBS acted for Spanish hotel Hispania which on its €2bn takeover Blackstone in July. The bank also advised Finnish real estate investment company Sponda, which was also taken private by Blackstone this summer. Horrobin says he expects the take-privates in the region to continue. “As the large private equity shops are all shifting their focus to expand more in the core and core-plus space, we’ll continue to see in particular continental European real estate companies which trade at systemic discounts as attractive targets. “Part of the reason is borrowing costs. When it comes to continental European versus the UK, the lower borrowing costs in the Continent means it’s easier to make a return work there.” To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette Main image © Jon Enoch