Interview with Josephine Jones

Josephine is Head of Strategic Capital at Knight Frank, and sits on Knight Frank Capital Advisory Board, covering capital finance sourcing and structuring across all sectors and from debt through to equity.  Josephine has nearly two decades experience of originating, structuring, executing, and advising on private debt finance, and has held roles including Head of Credit & Lending, Asia Pacific, and MD, Real Estate Finance, Asia for HSBC’s Global Banking division.

Over her banking career she has led over $30bn in transactions across Europe, Australasia, and Asia, predominantly for large institutions. Her experience spans leveraged finance, infrastructure finance, corporate M&A and real estate finance. As a thought leader, she has led a number of firsts including the first Term Loan B in Australia, the first LBO in the Maldives, and the first cross-collateralised green real estate portfolio financing in India. Josephine holds an MA and BA from Oxford University, a diploma in Italian Language and Culture, the CFA designation, and a Level 7 Diploma in Non-Executive Board Directorship. 

You’ve recently returned to the UK, after years in Hong Kong – just towards the end of the pandemic – what has that transition been like?

It’s a huge transition, in terms of the different cultures, the different market environments. I think what has been so interesting is that I have been fortunate to transition back when the market transitioned, and I’ve been able to approach the market with fresh eyes. This has been a volatile 18 months everywhere, but markets have adapted, and the opportunity set that this new normal offers is really exciting. We are at the beginning of a new cycle, and there is creativity right across the sector.

What drew you into the real estate capital sector? You’ve had a 12-year banking career with HSBC leveraged buyout finance, infrastructure finance, corporate acquisition finance, real estate finance, you name it. Why the move into capital advisory?

I think that really comes down to how the market has changed. In particular the way that the UK and European market has become disintermediated by advisors. If I think back to the beginning of my career, the market was very much relationship bank led and relationship banks had significant capital to deploy. What we’ve witnessed over the last 10 to 15 years is the impact of regulatory capital on the way that banks lend, and a need for advisors to absorb the volume of players out in the market. For example, we’re in contact with over 300 non-bank lenders and a similar number of equity investors. That’s not something that can be effectively done in house. It’s a really dynamic space to be in.

What lessons were you able to bring from mainstream investment banking into the real estate advisory space?

If you’re trained as a lev-fin banker, as I was, you learn the critical importance of cash flows and credit analysis. Tenant credit analysis is key to real estate finance. When we look at development companies, understanding their working capital and the impact that can have versus accounting P&L is fundamental. For clients, having an advisor who has spent 15 years presenting to credit committees is invaluable.

Secondly, banks manage global multi-product relationships very well. Maximising the potential of global relationships across multiple jurisdictions and multiple product lines is a powerful asset for client servicing within a global advisory franchise; cultivating and growing this is key.

What are the key challenges facing your clients now?

One word: pricing. Pricing debt, pricing equity, pricing future revenues. One of the positives is that a lot of that has already happened and we’re beginning to come through that. There’s now pressure to deploy, both equity- and debt-side, which is kicking transactions back into action, led by the UK which has re-priced faster. This is great for us; we are seeing high transaction volume for debt and equity across the desk.

How confident are you that with repricing and interest rates we’ve gotten over the hump and can see the shape of what’s coming down the line?

We have learned to accept that volatility is a feature of this market, and that’s now priced in. It’s likely we are broadly at the top of the rate cycle – inflation is beginning to come down and we’ll probably level at and stay around the 4% mark for the medium term. I expect inflation will not fall as fast as the market anticipates, and so the forward curve looks attractive from today’s standpoint.

What sectors and investment assets do you like right now for your clients at Knight Frank?

We remain sector-agnostic, assisting clients across various sectors. Lately, we’ve seen strong interest in logistics, healthcare, and the living sectors, which offer attractive rates for both debt and equity. The office market is an interesting sector as the bifurcation continues and we are seeing a number of repositioning strategies come to the fore. And there is a growing demand for alternatives.

You talked a little bit about capital flows. One of the big stories of the last few years has been the arrival on the scene of alternative lenders. How do you think that’s going to continue to play out?

We’ve had a huge change in the spectrum of the lending universe. I think a lot of that has come from the continued diversification of where investors want to deploy, and that they’re looking for more private debt capital across the portfolio.

But also, what we’ve seen is that for a short period of time it seemed as though the balance of return was really more toward the debt side on a risk-adjusted basis versus the equity side. That propelled private equity buyers to come into the debt side as well. The question is: do they then disappear once the market normalises? The answer is no, they have become a core component of our financing ecosystem. I think growth and consolidation will be the next phases.

Can you talk a little bit about the creativity that’s implicit in putting a deal together?

Markets go through cycles. There are cookie cutter transactions when the market is developed; then the cycle shifts and there are more creative structures. We’re at the beginning of a new cycle now and it’s ripe for creativity in a way that it wasn’t four or five years ago.

Can you tell me a bit about you pioneering concerns like diversity, inclusion, and women’s rights in Asia?

I’ve always been a key supporter of diversity and balance. And it does become easier to take a stand as you have a little bit more seniority. I think there is now full recognition that diversity is incredibly important. Only with the true diversity of thought, can we encourage a wide array of challenge and listen to that challenge.

In Asia I worked with both male and female colleagues to drive policy changes to support balance. I’ve also never been shy to lead by example. However, in many respects, Asia – and particularly Singapore and Hong Kong – can show us how to lead the way. The level of affordable childcare available to families in these countries enables both men and women to have the time they need to devote to their careers.

As a senior woman what sort of progress do you feel we’ve made in driving the diversity and inclusion agenda and creating workplaces that are more inclusive and less toxic? 

I’m delighted to have joined Knight Frank as one of three female partners at the helm of Knight Frank Capital Advisory (KFCA). In real estate that’s rare! Culture is key, and I think as an industry, whilst there is a long way to go, much of the ground work has been done. We must now keep the pressure on to enable those changes to embed themselves into culture.

One of the things that I think typifies your approach in your career is that passion and energy and positivism are professional hallmarks. So when you’re hiring someone, do you overtly look for that as well?

Positivity and passion are critical. They aren’t necessarily checkbox items but more of an intuitive assessment during interviews. Positive energy is key to enjoying work but also it’s about being able to step back and see the big picture. Candour and respect are also important. Today’s culture comes with deep respect for individuals as people, and it’s part of our ESG progress.

Do you think that cultural change is here to stay, the rebalancing around candour and respect?

I do believe it’s here to stay. It’s part of human nature. And it’s crucial to building trust in relationships.

You’ve had some big shifts both geographical and sector wise, where do you think, your career is going to take you next?

Geographical and sectoral shifts have not only been exciting, but also enhanced my experience and positioned me to be able to support clients holistically today. Knight Frank has an incredible global brand; there’s a huge opportunity here and I’m looking forward to continuing to grow that.