If the time someone is forced to spend on gardening leave is a reflection of their potential impact, then EY’s new trio of real estate tax partners are held in pretty high regard.
After 18 months sitting on the sidelines and travelling the world following their departure from big four rival KPMG, Nicola Westbooke, Richard White and Richard Ross (pictured with head of real estate Russell Gardner, left) now have their feet back under their desks.
EY is aiming to expand its market share further with more new recruits in the pipeline. And it is targeting listed sector mergers and acquisitions, channelling Far Eastern capital through its international network and onshoring capital through the establishment of new REITs.
The new recruits have an enviable trophy cabinet of tombstones and at KPMG they worked on deals including the £2.6bn takeover of Canary Wharf Group by Brookfield and Qatar Investment Authority, as well as the IPOs of Kennedy Wilson Europe and Secure Income REIT.
The deal initiator
White, the former head of real estate and real estate tax at KPMG, is widely known for initiating deals rather than sitting quietly in the corner doing the paperwork. And at EY he is not being given a bureaucratic management role to free him up. All three are “JAPs” or “just another partner”, alongside Russell Gardner, EY’s head of real estate.
The past year and a half has been a chaotic one in terms of the EU referendum, the election of Trump as US president and areas such as luxury residential and secondary retail now rife with uncertainty. White says that it was a good period to have missed.
“In some ways it makes it easier as everyone is still trying to work out the uncertainty. When we left, so much of our focus was on student accommodation, but with returns being squeezed investors are turning to PRS instead,” he says.
EY has more than 250 staff focused on real estate in the UK including 13 partners split across corporate finance, tax and auditing. At EY real estate, hospitality and construction is its own department with its own budget – in some rivals it can be an arm of the financial services or investment management divisions – so EY’s team has more control over its direction.
EY’s real estate team: who to know
■ Russell Gardner, head of real estate
■ Fraser Greenshields, partner and corporate finance leader
■ Mathieu Roland-Billecart, partner
■ Richard White, partner
■ Nicola Westbrooke, partner
■ Richard Ross, partner
■ Richard Hall, senior transaction support partner
On auditing EY competes with the other big four as it does on tax alongside top law firms. On the corporate finance front, which focuses on M&A, equity and debt raising, it tends to be up against investment banks with specialist property teams such as Rothschild and Lazard as well as the corporate finance arms of major agents.
“An accounting firm can handle complexity better in house. We can do all the parts. The client may not select us to do that, but we have corporate finance that can do the M&A and financing, we can do the structuring and lots of clients need that accounting advice and need to understand what the impact of a deal might be on their balance sheet. You can’t do that with a law firm, investment bank or agent,” says Ross.
The corporate finance team’s work is eclectic but has particular expertise in healthcare, hotels and leisure. This year’s deals include advising Patron Capital Partners on its purchase of stakes in equity release business Retirement Bridge and house builder CALA from Electra, and acting for TPG on its purchase of A&O Hotels & Hostels.
Big and unusual things
“We will see big and unusual things happen soon as a result of people taking differing views on what the market is going to do in the next five or 10 years, in particular in the listed and M&A front, where we are seeing some firms trade at big discounts and others at premiums,” says Fraser Greenshields, who leads the corporate finance team.
He adds: “We also think we will pick up some restructuring and administration work too but we are not anticipating it to be quite like in 2008. I suspect around the leisure side it will happen as we see consumer spending getting squeezed.”
Being part of a company with 231,000 employees and an annual turnover of $29.6bn (£23bn) means the team regularly picks up work through its international offices, particularly from New York, Germany and the Far East, the latter of which is becoming important given current capital flows into Europe. Ross says that three of the four deals he is working on involve Chinese capital.
A tool for validation
“Getting buyers validated through the network is powerful. If someone comes out of Singapore that we have never heard of, we’ll find out that they are not just window shoppers if the firm knows them well,” Gardner says.
Westbrooke is one of the market’s top REIT specialists, having been involved in the working group that devised their formation in 2006. She is eyeing more work coming EY’s way through the push for greater transparency and onshoring and a subsequent expansion of the number of single-asset REITs.
“There is a push to be onshore rather than offshore at the moment. And if you are going to be onshore you want to be in an efficient vehicle. Single-asset or small portfolios owned in joint ventures that are closely held by institutional, sovereign wealth or listed investors will work. Everyone thinks it’s some sort of magic to convert and meet the requirements, but it’s not an overly complex process,” she says.
EY flies under the radar compared with some advisory players but there are reasons to think that it will be coming closer to the forefront. Gardner says: “This is a big step but it’s not the end. There will be more senior recruits soon. It’s only part of a transformational process.”
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