ORIGINALLY PUBLISHED 13th MAY 2019
Established talent is being hoovered up – where are all the start-ups vying for their place?
Small real estate investment managers are becoming a critically endangered species across Europe as property investors and international fund managers across the world buy them up. Not all investments are structured as an outright buy – some acquisitions are phased through progressive stake building or by call options. All, however, seem to be motivated to ultimately achieve full ownership.
The key rationale of the acquisitions is to secure the services of entrepreneurial individuals and, in doing so, to gain access to their pipeline of deal opportunities. For these international purchasers the alternative to acquiring is the risky and time-consuming process of building a team organically with the necessary experience and track record across major European jurisdictions. To senior management with fund raising targets and/or money to deploy, the lost time of building a team is simply not a pragmatic option. After all, get one large real estate deal right and the costs of buying the team will seem minor!
International investors strongly favour buying full-service investment management platforms for their regulatory credentials and for their strong annuity income streams, as investment management services generally have long contracts and strong margins. Less favoured are the small non-regulated operator platforms providing lower-margin asset management revenues, which tend to be secured only for the business plan duration of an investment. International investors typically regard these platforms for their potential, at best, for a series of one-off asset deals.
The top targets for international investors are platforms that are both regulated in multiple jurisdictions and are well embedded into at least several major European real estate markets. Both attributes usually indicate the target is going to be immediately accretive to transaction capacity. The ability to run investment vehicles on a pan-European basis is very valuable because the reality is that, despite half a century of European integration, each countries’ real estate market is still remarkably bespoke.
