Episode summary
Why This Investing Pro Is Looking to Europe | At Barron's
At Barron's
· · 21 min · Hosts: Andy Serwer · Guests: H. Cabot Lodge III
Summary
H. Cabot Lodge III argues that Europe is the more attractive market for sale-leaseback and real-estate-backed financing because it is larger, less crowded, and structurally harder for competitors to enter. He says Europe has about $8 trillion of corporate-owned real estate versus $4 trillion in the U.S., while deal competition is lighter and legal, currency, and language complexity create a moat for local specialists. He also points to higher financing spreads: the 10-year bond is around 3% in Europe versus a 10-year Treasury at 4.5%, which can make positive leverage easier to achieve.
Lodge says his firm focuses on mission-critical industrial and manufacturing assets, not generic office buildings, because plants are sticky and often costly to replace. He says the firm targets critical materials, non-discretionary retail, consumer businesses, and other themes that are less exposed to AI disruption. He also sees higher rates and looming corporate maturities as supportive for sale-leasebacks, since companies need capital and can still generate accretive proceeds versus private-equity entry multiples.
He says Lodge Quai has about $600 million in AUM and serves institutional investors, sovereign wealth funds, family offices, pension funds, and charities. The business is built around long-duration income rather than liquidity, and he expects higher rates to keep credit-oriented investors active, even if lower rates eventually bring commercial banks back.
Key takeaways
- H. Cabot Lodge III says Europe offers a bigger corporate real estate market and less competition than the U.S., which supports better pricing power.
- He says the firm seeks mission-critical industrial assets because they are harder for tenants to walk away from than office properties.
- Lodge says higher rates and refinancing pressure are increasing demand for sale-leaseback capital from European companies.
- He says Lodge Quai manages about $600 million in AUM and sells investors long-term, asset-backed income rather than liquidity.
- Lodge expects credit funds to stay active while rates remain higher for longer, though falling rates could bring banks back into lending.
Notable quotes
“There's about 8 trillion of corporateowned real estate in Europe versus 4 trillion in the US”
“when we compete for a deal, we're competing against maybe 5 to 10 other biders, whereas in the US it's 30 to 50 biders”
“we provide the intermediation between companies seeking to pull the capital out of their fixed assets and redeploy it”
“We like to buy the manufacturing uh asset, not the office building”
“right now we're about 600 million in AUMUum”
How the episode opens
Hello everyone and welcome to At Barrens. I'm Andy Sir and welcome to our guest Henry Kat Lodge, the third founding partner of Lodge Quay. Kabat, great to see you. Thank you so much for joining us. — Thank you Andy. It's a pleasure to be here.
So tell us about your investment firm Lodge Quay. What is exactly the what they do? Well, it's a business that uh in an industry that I've been involved with for gee 45 years, I think.
Um I've switched between running the credit tenant lease business for New York Stock Exchange companies. Um and then going into starting my own business. Uh the first foray was with William E.
Simon, former secretary of the treasury, where we uh formed a fund that we merged into the largest publicly traded real estate company in New York Stock Exchange. I left there to start another fund uh with a guy named Ray Wera who had just formed um CBRE. Uh he was CEO and chairman.
Uh and um I then went back to uh Europe with Bill Kerry uh at a company called WP Carry and was president there. uh for four years and I found that Europe was very interesting for this asset class because well for a number of reasons which we can get into later um but um there was a point at in in European history I'm sure you'll remember the era of the pigs where it was uncertain whether US investors wanted to invest dollars in Europe and so um I left to say this is the exact time where we ought to be investing
The pigs is an acronym for — Portugal, Ireland, Greece, and and Spain. I think Spain was the other one. Now, of course, Greece and Ireland are are thriving economies.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- europe investment
- market size
- competition
- global markets
- investing strategy
Companies and tickers mentioned
- Lodge Quai Capital Management
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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