Sometime this month, London-based Patron Capital is expected to announce the final close of its latest pan-European opportunistic fund, Patron Fund IV. The only certainty is that the event will be closely monitored in European private equity real estate circles, as Patron will become the first in a big field of firms to have reached a final close this year.
Nothing generates quite as much excitement as a good fundraise. However, even if Patron does announce a capital haul in line with its target of €850 million, experts say it cannot be taken as a barometer of demand for European funds per se.
One reason is the peculiarity of Patron, which makes what one expert called ‘quasi-private equity-style’ investments in companies backed by real estate. That makes it closer in nature to California- and London-based GI Partners or UK private equity firm Terra Firma than more traditional private equity real estate firms. In addition, this gives Patron an almost unique ‘story’ in the eyes of investors.
Marc Mogull, founder of Benson Elliot Capital Management, said: “Patron has done well in a challenging environment. They’ve got a unique story that investors have embraced.”
Fundraising experts also insisted that extrapolating from Patron’s equity haul to suggest interest in Europe is back could be dangerous. In reality, they said there currently is a “mixed bag” when it comes to how investors perceive the region.
One seasoned London-based placement agent said: “The problem is there are a lot of groups that are limited as to what the debt ratio in a fund can be, and a lot of opportunistic funds are further up on the risk curve than many can do.”
For Europe’s other private equity real estate firms, this points to a chequered fundraising experience and a long hard slog, much as Patron itself has endured.
Patron and its placement agent, Monument Group, set out on the fundraising trail around April 2011, just in time for the Greek meltdown. The firm set off with the ambition to roughly match the capital haul of Patron Capital III, which closed on €867 million in 2007. However, as the summer of 2011 wore on, institutional investors became extremely nervous about the whole of Europe and it became clear to Patron that the going was to be tough.
Despite the slog, by the turn of 2012, Patron had managed to reach roughly 65 percent of its target, with €472 million in commitments and around €100 million in co-investment, sources said. Then, over the summer, the firm kept going, apparently putting the finishing touches to the last €50 million required.
Meanwhile, there are plenty of other fund managers in the market also hoping to raise significant equity. They too can expect a hard ride.
Breslauer’s new gig
Patron’s founder has joined the former European CEO of Lehman and a KKR buyout king on the board of Revetas
Some would say Patron Capital founder Keith Breslauer already has his hands full with a newly-raised opportunity fund to deploy. Still, that hasn’t stopped him becoming a member of an advisory board at Revetas Capital, a firm focused on Central and Eastern Europe.
Breslauer is part of the board alongside Jeremy Isaacs, the former chief executive officer for Europe, the Middle East and Asia-Pacific at Lehman Brothers from 2000 to 2008, and a very senior member of the European buyout team at Kohlberg Kravis Roberts, the name of whom Revetas preferred to keep under wraps.
Revetas founder Eric Assimakopoulos told PERE that he became acquainted with Breslauer as they both share a love for extreme outdoor pursuits and were introduced to each other on one such trip by a mutual friend at a UK property company.
In a statement, Patron said the arrangement with Revetas was not an agreement to invest together necessarily, but the firm would help Revetas by providing advice on its Central and Eastern Europe (CEE) strategy. A spokesman added: “The relationship potentially could help Patron to unlock opportunities within its core focus of Western Europe that may be held by (CEE) banks.”