Interview
Dr. Marcus Sasse, co-founder, looks back at a pivotal first operational year with Club Estate AG. The real estate boutique has specialized in best in class co-investments and club deal solutions.
Club Estate celebrates its first anniversary. As CEO and co-founder how would you sum up the first year?
2019 has been an exciting year for the team at Club Estate. We managed to achieve major milestones of our business plan. Our state-of-the-art digital platform went live in February 2019, we presented properties worth >EUR 500m to our clients and closed our first larger transaction. Furthermore, we advised various clients on co-investments and capital raising. We hired Nicolas Voëlin to further strengthen our capabilities. To sum it up, I'm delighted with our achievements in the first twelve months, and we have a strong pipeline in place to continue our growth path in 2020.
Why do you believe co-investments have a bright future in the real estate capital market?
In the past, co-investments were used only sporadically, to fill a financing gap. In the meantime co-investment solutions have revolutionized the way professional investors approach direct investments in Real Estate. There are major benefits for investors and investment managers alike.
Real estate has always been and will remain a local business with competitive advantages for players with a local expertise. Therefore, from the investor’s point of view, it makes sense to invest alongside an investment manager who has local, sectorial (office, retail, logistics, etc.) and style (core, core+, value add, opportunistic) expertise and track record . We call such investment managers “local champions”. By investing alongside numerous “local champions”, investors do also diversify risks associated with a single investment manager and reduce overall fee levels. Finally, co-investing strengthens the alignment of interest between investment managers and investors and enables know-how transfer.
For investment managers, co-investments offer an opportunity to diversify the investor base and intensify relationships with investors. Furthermore, it enables them to acquire larger properties, re-capitalize equity, increase AuM and ultimately maximize revenue streams.
What is crucial to successfully co-invest in real estate?
There are various pitfalls when co-investing. Every property and every investment manager is unique and bears specific risks . In order to mitigate those risks and identify attractive deals by best-in-class sponsors, it is essential to have professional selection processes with regard to investment managers and deals. That is why we have established a unique proprietary selection process at Club Estate: During the investment manager selection process, local champions are identified by conducting a thorough due diligence on each investment manager’s track record in regard to style, sector and region, its governance structures, internal incentive structures and so on.
Potential deals, put forward by local champions, again undergo a thorough selection process, during which we examine the risk and return associated with the deal by analysing macro/microeconomic factors,property market demand/supply, market liquidity & transparency, asset characteristics, etc. and determine whether the local champion matches the required skills to perform the business plan.
Furthermore, in order to successfully co-invest with local champions, it is crucial to understand the extent of control rights, the asset-related business plan and holding period, deal structure (tax implications), and many more details. At Club Estate we support investors to avoid pitfalls associated with co-investments and facilitate the entire process, through our digital platform.
What does Club Estate differently?
Club Estate is building a scalable business powered through a state-of-the-art digital platform. Our philosophy is based on three principles. First of all, we focus 100% on the investment needs of family offices and institutional investors, providing them with exclusive access to best in class real estate co- investments. Since we put quality over quantity, we work with selected investment managers on an invitation only basis. We partner with “local champions” going through a systematic proprietary manager and deal selection process. Thereby, we focus on aligning interests between the investor and the investment manager. All of our presented transactions have passed our rigorous selection process. And finally, we offer assurance for the investor. Fee transparency as well as the manager and deal monitoring is part of our value proposition.
Tell us about the main goals of Club Estate in the near future?
We aim to further grow our business in 2020 and establish Club Estate as a leader for real estate co-investments and club solutions. In order to do so, we will expand our network of “local champions” and professional investors globally and grow our team of inhouse experts, building a global co-Investment community.
Additionally, Club Estate will expand its provided services. We are launching a global co-investment fund for qualified investors in Q1 2020. This will enable investors to access a diversified portfolio of “best-in-class “ investment managers and strengthen our position as real estate co-investment boutique.