HOSPITALITY Property
Post-pandemic property is all about the middle classes Middle-class middle-of-the-road hospitality and residential schemes will be the big property stories of 2021 and 2022, according to one of the world’s leading investors. It could mean a radical change in the flow of work coming your way. David Thame reports.
K
eith Breslauer is restless. He is always restless. The fast-talking US-born Senior Partner of Patron Capital is perpetually looking for new angles. That’s his job. Patron Capital, which he founded in 1999, is one of the big beasts of UK private equity, and has proved to be a seriously clever investor. Careful analysis and some well-educated hunches have propelled the Patron team to the position where it has capital of £3.8 billion invested in property and the businesses that operate it. Until now Keith’s analysis has been on the money, which makes his latest strategic plans worth listening to. Earlier this year, Patron completed another £844 million fundraising – so where will this war chest get spent? The answer is that Keith is taking a close look at the office, residential and hospitality sectors, with the aim of booting-out projects that rely on international or high-end users. He has a theory about what comes next. Rather than a relentless focus on the international travel markets and overseas apartment buyers, Keith predicts a return to property that depends on the homegrown middle class.
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We’ve invested in more than 15,000 hotel rooms. We like the hospitality sector. The trouble is that it is very tricky to estimate when it will come out of the current crisis.
” 52 | Mix 209 February 2021
‘We haven’t been sitting on our hands through this crisis. In the last six weeks we bought three office buildings, four residential projects and invested in various companies,’ he says. Their recent buyers have been informed by some new, post-pandemic thinking. Keith points to research by Capital Economics, which predicts a consumer boom in the second half of 2021. The surge in spending might represent a one-off correction after 18 months, when consumers have had no choice but to stay at home. Or it may herald a more substantial change in the way consumers think and operate. This crux is the starting point for Patron’s investment strategy. In these confused circumstances, the middle of the road feels like a good place to be, Keith says. ‘In times of stress, think about the midmarket, think about what the average person does. The middle class market is a nice place to be,’ he says. Employment risks are low, disposable income relatively stable and, combined, make anything the middle classes favour feel like a safe bet. And it’s not a global middle class Keith is targeting, it is the British resident middle class. Rather than build highend residential schemes for off-plan purchases from Chinese or Hong Kong investors, Keith prefers to build for domestic owner/occupiers. ‘So much high-end residential is just a place for Chinese people to store their wealth. We’re not doing that, we’re doing office and residential and logistics developments based on what British
Keith Breslauer, Patron Capital
middle class people do and want,’ he explains. In practice, this means avoiding extremes. Take the hospitality sector as an example. when Patron Capital’s finance helped refashion the Mercure hotel brand, a mid-market business offering in a crowded sector. ‘We’ve invested in more than 15,000 hotel rooms,’ Keith tells us. ‘We like the hospitality sector. The trouble is that it is very tricky to estimate when it will come out of the current crisis. The experts suggest 2023-2027, which is a very wide time range because business travel, local travel, conference hotels and so on will all recover at different speeds. So look at the experience in the US, and we can see that mid-market domestic travel has done well even during the pandemic because you don’t need to use planes to get there.’ Does this translate to the UK? Yes, Keith says. ‘Hospitality is not dead,’ he insists, and Patron will be buying into mid-market hotels that appeal to middle class domestic users.
