For institutional and private clients with larger assets, an individual fund mandate can be the optimal solution: As the sole investor of such a fund, its real estate strategy is implemented precisely.
In order to be able to build up a yield-bearing asset, it is important that a client deals with his asset goals. This implies the income requirements and the requirements for the risks. One of the tasks of an independent consultant is to reconcile the earnings requirements and risk requirements with realistic expectations of the market and, above all, the risk-bearing capacity of the customer – also in the area of real estate.
As part of total asset management, a real estate quota is initially set for customers in this area, followed by the development of an individual real estate strategy. HQ Trust’s real estate business covers the entire value chain for this type of investment: from direct investments to managed accounts (individual fund mandates) to indirect real estate investments.
Build the appropriate real estate quota
Especially for institutional and private clients with an investment volume of more than 100 million euros, an individual fund mandate is available to build up the right property ratio. The client is the sole investor of this fund, also because at the same time there is usually no comparable investor with similar interests. In order to achieve sufficient diversification of the portfolio, the future strategic orientation should primarily consider real estate in its own structure. Later, new investments will be made in the individual funds.
This solution offers the client the strategic sovereignty in the real estate strategy and at the same time the shift of the property selection at fund level to an asset manager. In addition, there is maximum control during the fund’s term. A Family Office or Multi Family Office such as HQ Trust represents the interests of the customer, advises them holistically on real estate issues and assumes the role of owner representative.
Approach and implementation
The customer’s fund to be created optimally uses a service capital management company (KVG). This service KVG provides the legal framework and assumes administrative tasks such as contracting, controlling or reporting. Another advantage of this solution is that the anonymity of the customer is maintained. In addition, a depositary / custodian bank takes care of controlling the processes and procedures of the fund.
Below this level, the individual portfolio and asset managers are installed, who can either manage the entire asset management of the fund or specialize in individual regions or types of use.
At the lowest level of the value chain is the management of the individual real estate, the property management. This can be done by the asset manager himself or by commissioning specialized service providers. This is an essential element for the long-term successful performance of the fund.
Beauty Contests for selection
As part of the selection, a beauty contest will be carried out in the first step to select service KVG, depositary and asset manager in the residential and commercial real estate sector for the client’s individual fund. The providers are evaluated with the help of a comprehensive catalog of criteria and presented to the customer. The final decision is up to the customer.
After selecting the various parties, the framework conditions for the subsequent development of the special fund and its operational processes are determined. At portfolio and asset level, these include investment guidelines and strategy. While the latter is regularly checked for its feasibility for market reasons and adjusted if necessary, the investment guidelines at portfolio and asset level are generally to be understood as a fixed framework. These guidelines are binding for all parties involved and make it possible to measure the risk / return ratio of the real estate fund. There, the permitted countries, user types, individual object volumes and investment styles are deposited with their respective quotas.
Ensuring a smooth real estate acquisition
HQ Trust has developed a process for acquiring the real estate through the fund. First, the managers present real estate investments as part of pipeline calls. After a preliminary check, it is decided whether a visit should take place. After a positive presentation of a potential object, the real estate team inspects the object together with the client Asset Manager and KVG.
If the object receives the consent of all participants after the inspection, HQ Trust creates an Immocheck for the customer. This consists of a location analysis, in which the market and micro market of the property is illuminated more closely. In addition, an investment market and SWOT analysis as a basis for a possible recommendation for the follow-up of the property and release of due diligence.
Subsequently, the customer gets a clear decision to buy or “not buy” the property given. If the property is released by the investment committee, the property can be acquired. Throughout the process, it must be ensured that the investment strategy and implementation within the overall portfolio are consistent, that risks are identified early on and, if necessary, appropriate countermeasures are taken early.
Information source asset management reporting
During the holding period, the assigned asset managers look after the real estate. So that the customer is informed in detail during this time, there is an asset management reporting. It contains all the essential information about rentals, rent arrears or markets and allows the customer to receive even more detailed information about the individual object as needed. For specific topics on real estate such as a vacant space, on-site appointments are organized with the responsible asset managers.
To round off reporting, investment committee meetings are held regularly to report on fund status, market and strategy to all stakeholders. These include properties that are already in the portfolio, properties that have not yet been transferred (project developments with a later capital outflow) as well as potential new investments. In addition, a strategy and focus is given for the residential and commercial managers, which type of real estate in the future should be in focus (property sizes, type of use, location) to ensure appropriate diversification.