BLUEPRINT: Making a difference

Keith Breslauer, founder of Patron Capital, the London-based firm that has closed on the largest European opportunity fund this year, talks to Robin Marriott about life, family and business…and how he just can’t keep still. December 2012/January 2013 issue.


Many financial services firms like to have sterile office foyers, perhaps to place emphasise on being an ‘institution’ – as if being faceless was a plus and displaying personality a weakness. Not so Patron Capital Partners, the London-based firm founded by Keith Breslauer in 1999. Along a narrow passageway, off which there are three conference rooms, are four long shelves displaying various momentos, artefacts, awards and photographs.

The bottom shelve is mainly occupied by “historical investments” that Breslauer was involved with back in the day when he was at Lehman Brothers and kept a fold-out bed in the offices – before the advent of email changed the need for that.

One of these older tombstone recalls a transaction that involved the late British newspaper baron Robert Maxwell. Nestled close by is another trophy marking a distressed real estate deal related to the ‘Southwest Plan’, in which the US government provided assistance to private investors bailing out failed banks during the savings and loan crisis of the late 1980s. “It is a blueprint for what should happen to NAMA [Ireland’s National Asset Management Agency],” remarks Breslauer before throwing out a hand in the direction of another tombstone.

The middle shelves are taken up with Patron deals where the firm “actually bothered to do the tombstones”, he says. That shelf is mixed with a whole host of industry awards and “deal toys”. For example, there is yellow box of crunchy nut cereals, and a girl’s thong across which is printed the word ‘Generator’ – a Patron investment in a student youth hostel business.

Then on the top shelf are some even more interesting-looking things such as a tiny fireman’s helmet, a Philippe Starck teapot nicknamed “the beaver”, which is something to do with a high-end residential block in Copenhagen that Patron bought and converted. There is a flag which mountaineering enthusiast Breslauer took up El Capitan in Yosemite National Park, plus a number of American Football helmets from various US schools and universities that make up a significant contingent of the firm’s LP base. One is to do with HRJ Capital, the investment firm started by former NFL stars which collapsed in 2009.

What Breslauer is most proud of is actually not displayed on the shelves at all, but on a wall closest to the entrance: photos of various charitable projects such as the El Capitan climb for the Royal Marines Charitable Trust Fund and a new initiative where Patron is supporting the building of a schools and facilities in India. Last Christmas, Breslauer, his four children plus his in-laws went to visit one of the projects set in motion by Akshayapatra, a charity to which former Hypo Real Estate professional Harin Thaker, now devotes much time.

“The combination of work, support and charity is part of our ethos and that is what this shows,” Breslauer says before turning on his heels to have his picture taken. “The theory is we are here to change the world. Not sure we do, but that’s the theory.”

We are here to talk to Patron after it recently closed Patron IV, which at €880 million looks set to become the largest European opportunity fund closed this year. According to Breslauer, Patron had to work like madmen to accomplish the feat, and got more than 100 investors into the fund because commitments made by some returning US universities and faculties were smaller than before due to capital constraints, or nervousness about Europe, or both. It now has news LPs hailing from the Middle East, and sovereign wealth funds.  

One reason for the firm’s success is to do with the firm’s hard-working ethos. Then there is Breslauer’s personal energy and fast-moving nature. Both are on show while the photographer takes pictures of him in front of the Patron sign, behind which is a large open office – his natural habitat to which we are not invited. Quietly, two young professionals appear to the side of him, holding a document. There is a rapid exchange, but only Breslauer’s upper eastside New York voice can really be heard. It seems Breslauer is well aware of all the detail of whatever this relates to and makes his views known immediately in machine-gun fashion. He says something about a management team and “smoke” and he tries to get his two colleagues to handle the detail best they can. The document ends up in Breslauer’s hand anyway. He pins it up against a wall with one hand and signs it with the other, thrusts it back again and the two young professionals go off seemingly satisfied.

With that, there is time for a few more shots at the behest of the photographer, and Breslauer tries not to look like “death warmed over” as his wife has previously joked. The reason he looks tired, he says, is because with the fundraising now over he makes a lot of short trips all over Europe to attend to deals, which means he gets less sleep than when flying long distance. Moreover, it is “fall ball schedule” with a host of charity dinners to make. This evening he has to leave one gala dinner early to make another, for example (the other being for The Prince’s Teaching Institute.)

Next, we cram a whole life-work ethic-business philosophy-family-religion-real estate markets-and deals talk into about 35 minutes. I already know this will be fast and furious from previous encounters. I also know that to play back the recording of our conversation at normal speech-speed will require the Dictaphone playback setting to be slowed to ‘0.5’ rather than the customary ‘1’.

One further thing that has been learned over the years is never to venture an opinion or make a statement unless you can definitely back it up. Even so, I fall into the trap when Breslauer mentions a recent trip to the Netherlands to attend a meeting on a recent Dutch distressed property deal Patron completed this year alongside TPG Capital, the US private equity firm.

“You know, I never would have seen Patron and TPG together as partners in a deal,” I foolishly say. “Why not?” he asks. I realise then that I’m not quite sure. He barely stifles a laugh at my ineptitude. No offence taken. However, if I had been there to present a deal proposition, we both know I would be shown the door.

Then I compound the error by remarking that the Dutch deal looked great, to which he says: “I think greatness is a relative term. Tell me when we exit something and I’ll tell you if it’s great.” The answer as to how Patron and TPG came together on a deal, by the way, is that TPG was looking at the corporate bond side of the Uni-Invest property company, while Patron was looking at the equity, and a broker married the pair.

The man from MIT

Despite his forceful personality and boundless vigour, even Breslauer had to start somewhere, and things could have turned out very differently had it not been for a chance decision by a potential investor.

Having decided to venture out on his own in the last 1990s, Breslauer’s new firm, Patron, had prospectuses printed and one of them found its way onto the desk of a director of real estate at the Massachusetts Institute of Technology (MIT). As far as Breslauer is aware, a pivotal moment occurred because Patron’s prospectus was one of a number jettisoned into the wastepaper basket, only for someone to fish it out again and take another look. The person in question was Peter Lewis, now a senior consultant at Towers Watson.

According to Lewis, the first Patron prospectus was in a place reserved for those groups that did not make the initial cut based on a quick review of the material presented. Lewis was heading to the UK and had an opening in his schedule, and remembered he had seen a PPM from a London-based outfit. He assuaged his guilty feelings about having a break while on an overseas trip by calling Patron to fill up his schedule.

Lewis recalls that he had no real interest and thought it would be tough to sell this fledgling manager. However, he says: “I left the initial meeting with the clear sense that this was a compelling opportunity!” Apparently, on the back of the subsequent interest from MIT, other schools came on board and Patron gained momentum to raise its fund. MIT itself didn’t make a huge commitment, but it led to two other endowments getting involved. The number rose to eight in Patron’s second fund. Now the firm has 31 US schools and university endowments in total across its funds. Another early investor was a corporate pension plan for a religious institution, which has followed Patron into all its vehicles.

Given that today the market for fundraising is so difficult, does Breslauer think he would make it if he started out today? Silly question. “I heard the same BS before. It took me two years to raise the first fund,” he says. “It was brutal. There was a friend of mine raising money at the same time. We only got to $80 million and we did it anyway. At the annual meeting after the close a couple of investors said they wanted to increase their positions so we got to about $110 million plus co-investment. The answer is, it is in fact easier now. You could argue it is easier because people think there is an opportunity now in Europe. I don’t see why we wouldn’t have been successful.”

Team Patron

If it seems like Patron’s success has a lot to do with Breslauer’s force of temperament, then he would argue with that, too. The firm has 10 leading partners. “Our ability to raise money, communicate with everybody and lead from the front is a style that every senior member of the team thinks like. I have been able to find people who think like me. The force of personality is probably down to the fact that I speak more and I probably have more energy than most and I help as a catalyst of ideas. But it does not mean in any way that it is ‘me.’”

A good example are the two senior partners in the company: Mark Collins is chairman of UK investment, and Kevin Cook, is senior development director. “I knew that in certain areas I did not have a particular skill set, so I learn from them. Shane Law, who is my right hand man, is another one. He knows how to do things that I don’t know, such as process – managing a deal from beginning to end in all possible aspects, including dealing with the necessary bureaucracy in transactions. We are working on a deal right now where another fund is a co-investor potentially. For us, we have already taken care of capital calls necessary and so forth. We are on top of it. The success of the company is the team, and that is not BS.”

The fourth dimension

What really matters to him is the performance of Fund IV. He says he doesn’t really care about other metrics one could use about the firm such as the amount of capital raised or how many products it has. “Fund IV has to make a lot of money and that is it. That is basically the driving force.”

Or, is it?  Breslauer seems to have an ulterior motive and altruistic streak. It appears that wanting to make a difference to people is in total alignment with making as much money for investors as possible. There is something in his background – a mention of his father for instance who he was very close to – that makes him want to succeed in business but also help people at the same time. He feels a responsibility to those employed by Patron’s portfolio companies, and also to the charities that Patron supports.

Religion plays a part as well: his Jewish faith is strong. Asked how it fits in with business, Breslauer says: “I need a framework to be able to balance all the pressures of work and a family to make sure my children feel I am a good father and to make sure my partners feel I am a good team mate. I also need a framework to make sure my behaviour is one of exemplary character. Some people use sport, or they have a hobby. If you have no framework, I find it impossible to manage the pressures and responsibilities. Something will fail.”

He then talks about his day. It started at 5.15am dealing with emails before training in the gym at his house from 6.30. From 9am he is at meetings at Patron. He reckons half the week is taken up dealing with existing investments and the other half with new opportunities. This evening he has the two dinners before returning home, fielding a few more emails before “passing out” and starting over the next day.

At Patron, a lot doesn’t happen strictly to plan, he says, but that doesn’t necessarily mean things go wrong. The point is they change, or aren’t what they at first seemed to be. Breslauer takes note of a business book he is reading about ‘thinking fast and thinking slow’. It is apparently hinged on recognising that human beings have this intuitive thought processes and also a critical review. The intuitive part is what your gut tells you. The critical review is about spending “cognitive time” to see if something makes sense. “You can’t have one without the other. We are trying to do both at Patron,” he explains.

When asked what comes first to mind when he hears the word “deal”, he says he hates it because it sounds like a quick trade. He prefers “investment opportunity”. When presented with an investment, he next asks “Why?” “Why does the opportunity exist, why does the individual presenting to me believe that they can make a difference in the opportunity, why is he confident we are the right match for this opportunity. That is what you have to ask yourself, always.”

He uses an example of being introduced to a distressed shopping centre and trying to get to grips with the core thesis of the opportunity. Assuming the person presenting can answer his questions and everything “smells right”, the next thing he will do is get in the car or jump on a plane to go and see if it is all really true. At the visit, some new aspect might come up. For example, a shopping centre with empty offices above it begs the question how to handle the service charges or deal with rates and how come the empty offices were not mentioned in the original pitch? Or maybe it was and he didn’t see it. So the visits prompt questions as well as comfort and also instruct on the route to exit. “Do you really believe someone else will want to buy it once it is fixed?”

When the word “LP” is mentioned, he says he sees a “wave of faces”. He feels like there is a block of individuals he is responsible to that all represent a basic set of rules related to what Patron sees as “the opportunity”. That opportunity is to do with those countries in Europe that have illiquidity, massive divergence between prime and secondary markets, cash rich investors looking for prime investments, significant distressed caused by overlevered financial institutions, a shadow banking system and certain players that don’t have enough capital to do anything. That is pretty much Western Europe today: UK, Germany, Spain, France and Italy is the order Breslauer puts the countries in. Central Europe is interesting, but the distress is not there, he remarks.

So, with deploying Fund IV the main target, does Breslauer feel he is on course in his business life? He repeats that delivering a great outcome for Fund IV is the objective. When asked why, he says this: “The honest answer, no matter how corney it sounds, is I believe I have been put on this earth to make a substantial change. In order for me to do that, I have to be financially very successful and plant all the seeds necessary to allow that change to exist. That change could be to individuals, to my environment. When I look at my client base, the fact that we have so many charities is a huge responsibility. If we screw things up, our charities may not have enough money to pay for their causes. The money they gave me is a retirement plan for a priest who makes $25,000 a year. So I look at that as part of the thesis that drives me.”

As we prepare to part ways, he adds: “The brutal answer is also that I could never sit still anyway. Since I could never sit still anyway, I might as well use it for good causes. It seems to work and I love it. I love the hard asset business because I love seeing what I do. I love how important history is to understanding business, and I love Europe for its different cultures. It affords a lifestyle to enable you to do a lot of great things and make a difference.”


Keith Breslauer
: New York
: Founder and managing director
: Patron Capital Partners
: London
: 71 (36 in the investment team)
Capital under managemen
t: €2.3bn
: Joined Lehman Brothers in 1987, working originally in the Financial Institutions Group in partnership with the Mortgage Trading Group. In 1993, while with Lehman, he  moved to London to target distressed assets in Europe and to assist in the creation and leadership of the Principal Finance Group, established to invest the firm’s capital in financial institutions and property assets and companies. In 1997, he left to create an investment fund focusing on smaller European property opportunities. As a bridge to the ultimate formation of Patron, he established and managed Capstar Holdings Limited, a company organised in London to originate investments on an exclusive basis for the Lone Star Opportunity Fund.

Patron deal book

The London-based firm is known for its private-equity style investments in operating companies backed by real estate. Here is a selection of some of the more interesting assets in the portfolio.

UK petrol stations
(December 2011)
Acquired Motor Fuel Group and its portfolio of 48 convenience retail units and petrol stations across the UK. Patron made the investment with Scottish Capital Group backed by oil industry veteran Alasdair Locke. Thirty eight of the assets are freehold, one part-freehold, with the remaining nine leasehold.

Youth hostels
(August 2007)
Acquired the sites and management of a family-owned budget youth hostel accommodation business in London and Berlin trading as Generator Hostels. Patron has since added six more assets in Germany, Denmark, Ireland, Spain and Italy. 

(September 2011)
Bought a portfolio of 26 regional and mid-market from the administrators to Jarvis Hotels. The deal was done in a 50/50 joint venture with West Register, part of the Global Restructuring Unit of The Royal Bank of Scotland. All the hotels now operate under the Mercure brand.

Five-a-side football  

(March 2008, then full takeover, December 2009)
Acquired Powerleague, a five-a-side football business with more than 460 pitches at 45 venues. Subsequently, Goals Soccer Centres with 44 centres came up for sale, but Ontario Teachers’ Pension Plan Board acquired it.  
Netherlands distressed prop co
(April 2012)
Teamed up with private equity firm, TPG Capital, to gain ownership of Uni-Invest and its €634 million Dutch office portfolio after acquiring a loan in a soured securitised debt vehicle known as Opera Finance (Uni-Invest). In doing so, it succeeded in the first known credit bid involving a commercial mortgage-backed securities (CMBS) deal.

UK Healthcare
(February 2011)
Has been buying operating businesses and undervalue assets for the firm’s UK Health Care programme. The strategy involves developing sites including in Basingstoke, Hampshire, Wiltshire, Somerset and Dorset.

German railway stations
(August 2006)
Purchased 1,004 railway station buildings and land throughout Germany, with Deutsche Bahn, the German state-owned railway operator, the main tenant. The largest asset is Frankfurt Ost Station, located on a core development site close to city centre.