A new generation of tech-savvy investment officers are providing family offices with access to buoyant global property markets via new innovative online real estate portals, says Emmanuel Lumineau, chief executive at BrickVest, the London-based online real estate investment platform.
Originally published by Campden FB, 31 MAY, 2017: http://www.campdenfb.com/article/tech-savvy-family-offices-eye-real-estate-online
By Emmanuel Lumineau
The traditionally staid family office sector has always been associated more with the preservation of wealth than technological innovation. But times are changing. A new generation of tech-savvy investment officers are providing family offices with access to buoyant global property markets via new innovative online real estate portals.
As the family office sector continues to face regulatory and compliance reporting costs it can be a challenge for investment offices to focus on technical innovation or diversifying into new asset classes. Family offices, which consist of private companies set up to manage the financial affairs of a single family, have in the past largely eschewed the real estate sector due to its lack of transparency and high investment fees. The sector has historically preferred to invest in asset classes such as equities and bonds despite the bountiful returns that property investment offers.
Maintaining wealth across generations has always been a complex task and the fall out from the financial crisis of 2008 has resulted in many family offices focusing upon avoiding risk. Preventing the permanent loss of capital, counterparty and credit risk and a lack of liquidity have been an ongoing concern in the family office sector in recent years. There are about 3,000 single family offices globally, at least half of which were set up during the past two decades, according to a white paper published in 2014 by Credit Suisse AG. Administrative family offices are estimated to have assets of between 50 million US dollars and 100 million US dollars, according to the Zurich-based investment bank.
Meanwhile, over the same time period the case for putting your cash into real estate located in prime residential and commercial locations has been compelling. Property investment returns have been bolstered by a low interest rate environment and a flood of capital into the sector. In times of economic uncertainty Hamburg has attracted global interest as a “solid” investment, according to research by PricewaterhouseCoopers. The accountancy firm’s report, Emerging Trends in Real Estate Europe 2017, cited the 1 billion euro Überseequartier mixed-use property development in the heart of Hamburg’s HafenCity. Berlin and Hamburg were the third and fifth most active European property markets in the period from the fourth quarter of 2015 to the third quarter of 2016, according to research by Real Capital Analytics Inc., a research firm based in New York. The capital of Germany and Hamburg attracted 9 billion euros and 4 billion euros respectively, the research found.
While these figures speak for themselves, real estate investing has largely been the preserve of pension funds and institutional investors. As property exposure can help enhance the diversification of a family office’s investment portfolio lacking opportunities to obtain exposure to real estate has hampered the sector’s capacity to achieve optimal asset allocation. Technological innovation is, however, opening up commercial and residential real estate opportunities to family offices. BrickVest is part of a nascent proptech sector that is enabling family offices to invest in institutional quality real estate that matches their preferred location and investment return profile. BrickVest provides property exposure through an innovative crowdfunding model, dubbed crowdfunding 2.0. Real estate crowdfunding began as a way for small-scale developers to garner capital and bypass the banking sector, often by obtaining capital from local investors. However, this model has been hindered by a lack of transparency and scalability. For example, when a project failed to make the projected returns, sponsors were often unable to provide the necessary detailed reporting to investors. The limitations of the crowdfunding 1.0 model made it incompatible with the needs of professional investors.
The crowdfunding 2.0 model deployed on the platform is a significant advance, allowing investors to obtain access to institutional quality deals in a regulated and fully transparent environment. Furthermore, in recognition of a latent demand among family offices for an interface offering exclusivity to real estate deals, BrickVest Select has been launched as an ‘invitation-only’ club to provide the sector with tailored services on the platform. The portal – which has a minimum deal size of 250,000 euros – enables family offices to invest directly in deals, thereby avoiding the high fees exacted by investment advisors or private equity companies. Family offices using the portal can bypass having to correspond with potential deal sponsors or attend workshops and real estate events. Investors using the hub instead have a single point of access to analyse and source deals. A generational shift in the family office sector has given rise to web-savvy investment managers using the BrickVest portal to peruse available deals online. Research cited in the Credit Suisse white paper found that many family offices in Switzerland and Germany are led by a single family member.
Corestate Capital Group, a Luxembourg-based real estate investment manager with assets of 16 billion euros under management, views the real estate market as being ripe for technological innovation and sees pent up demand for property investment among the growing family office sector. Corestate has used the platform to list investments that include a 125 million euro retail property portfolio in Germany. The portfolio consist of 21 buildings located in prime locations in German cities that include Bremen and Flensburg. The properties, which comprise more than 56,000 square meters, house major retailers, including Hennes & Mauritz AB and REWE Group.
Aerium LLP, a Luxembourg-based real estate investment manager, is also using the portal offering commercial property in Berlin located near Potsdamer Platz. M7 Real Estate Ltd, a specialist in the pan-European, multi-let real estate market, Thor Equities LLC, a New York City based real estate firm, and Venn Partners LLP, a London-based investment manager are also active users of the platform.
Family offices and high net-worth investors – with 8 billion euros of assets – make up the bulk of investors using the platform. These investors are poised to deploy 300 million euros on the platform over the next year, primarily in European and US real estate. The BrickVest platform has attracted about 200 real estate sponsors with 170 billion of assets under management. A strong pipeline of pre-vetted institutional quality investment opportunities in Europe and the US has given exposure to 350 million euros of real estate investment between March and May 2017.
The evolution of the family office sector has resulted in increased levels of sophistication and price sensitivity, creating demand for transparent platforms that do not exact hidden fees and charges. BrickVest Select is attuned to a desire among family offices for the ability to precisely locate real estate, according to their desired role as an investor and risk profile. There is even the potential for a family office to be a lead investor or take ownership of a complete deal. BrickVest Select represents an enticing window that opens up myriad real estate opportunities to a family office sector that has in the past been restricted from obtaining access to this burgeoning investment class.
Family offices, Institutional Investors and Sponsors interested in pre-registering for BrickVest Select can do so here.