Keith Breslauer is the Founder of Patron Capital, a real estate Investment Manager focused on opportunistic and value add strategies in Western Europe. On May 15th he kindly hosted members the ULI Young Leaders for lunch at his Mayfair office.
Breslauer hated real estate from a young age as it was a curse on his father who made and lost his fortune six times due to overleveraging, which resulted in a turbulent childhood and him finding early independence at the age of 16. However, he loved the money business and after competing an MBA at Chicago Booth, he joined Goldman Sachs at the early days of the Mortgage backed securitisation boom. Moving to Lehman Brothers in 1988 he worked on large scale distressed real estate deals until Lehman decided to set-up a principal business, buying and selling distressed bank and property assets. In 1992 this business delivered $1bn in profits and a new love of real estate.
In 1991 Robert Maxwell the media mogul and Lehman borrower was found dead in the sea and Breslauer was sent to the UK to fish for the funds. While in the UK he identified a significant opportunity in the distressed commercial and residential property markets and founded Lehman’s UK principal investment business. The voracious deal-maker left Lehman after ten years with five in the UK and then he was offered a management job in New York running the division – a complement but boring prospect.
Breaking out on his own, he did a JV with John Grayken at Loan Star which was a formative experience that gave him the confidence to launch independently. Patron started with the support of a UHNW individual, which enabled Breslauer to create a team, build a track record and an essential deal pipeline. This created sufficient credibility to draw institutional investors of scale into the first Fund. Fast forward 18 years and he’s 65% deployed on Fund V and planning Fund VI.
Patron operates on three business strands:
Corporate – acquiring real asset backed companies with growth, rather than break-up value.
Direct assets – Pan-European Office, Industrial and Residential deals
Secure consumer credit (mortgages)
Deals typically form two styles:
Large deals of scale
Smaller thematic deals
Patron’s 70+ staff, include 40 investment professionals including 10 semi-independent senior advisors (the deal hunters), 30 middle-office tax, finance and legal support staff and the 6/7 managing partners.
Patron staff members are described as high energy, intellectually curious and smart. Due to the high-pressure deal environment and fiduciary responsibility of money management, staff find a healthy balance through faith, family or sport. Sport is a recurring theme, the office has a rock climbing cave and there have been office ski-trips to Chamonix. Breslauer has also paddled 120 miles across the English Channel in aid of the Royal Marines Charity.
Breslauer personally dedicates 10 hours a week to charity and younger staff are encouraged to support charities such as Young Enterprise which provides young people with the financial education skills to bridge the world between school and work. The strong focus on charitable work at Patron creates and reinforces humility which is also good for business, particularly when you are “the largest money manager for American Churches that invest in European real estate” as Breslauer proclaims.
Breslauer’s view on the market is that liquidity risk is not priced into transactions, there is no illiquidity premium for buying a direct asset verses a shareholding. Therefore, the primary concern is that there will be an event that interrupts market liquidity, such as an unexpected interest rates shock, a government bond default or a cyber attack. The resulting retrenchment of the large sovereign wealth players and corporate investors would trigger an adjustment in market pricing.
Looking to the future Breslauer is focused on the next raise in the fall (autumn), and this is likely to be a trifurcate of funds or strategies.
Breslauer’s final peroration was that his single biggest fuck-up was mispricing duration risk, a good deal that takes too long, is a bad deal.
The UK ULI Young Leaders would like to thank Keith Breslauer for his candour and Patron Capital for supporting the Lunch and Learn series.
Words by Edward Jezeph, Homes England , ULI UK Young Leader