New scheme to offer access to real estate
Roll your dice. Pass "Go." Collect $200. Buy a railway station.
In reality, investing in commercial real estate has never been as simple as Monopoly makes it seem.
Individuals generally are not able to buy directly into commercial property development deals at all. But now UK startup BrickVest is seeking to do something vaguely reminiscent -- it is said to be bringing big-time commercial real estate development directly to Europe's monied masses across the continent.
The company officially opens for business this week, with a crowd-funding model that is planned to allow individuals to fund projects around the world with as little as a €1,000 investment.
They can later use the platform to sell their stakes, creating a more transparent and, if all goes according to plan, liquid, market than currently exists for such investments.
The company, which is regulated by the UK's Financial Conduct Authority, is hoping to attract deals in the £500,000 to £50m range.
"Traditionally, commercial real estate investment has suffered from issues around quality, transparency, liquidity and access," said Emmanuel Lumineau, the former real estate investment banker who is now BrickVest's chief executive and one of three company co-founders.
"We help solve for all of these issues."
The platform is restricted to "professional clients" as defined by Europe's Markets in Financial Instruments Directive.
But high net worth individuals with sufficient financial knowledge and an existing portfolio worth more than €500,000 can elect to be included. Lumineau said BrickVest hopes to open its doors to any wealthy lay investors within the coming weeks.
BrickVest will offer equity and debt investments, each of which will be classified according to strategy and risk by an independent ratings committee, appointed by BrickVest but not employed by it. The committee is headed by Remi Antonini, a former executive director of European real estate research.
Lumineau says this is a big change from the way commercial real estate deals are traditionally marketed. "No one sells risk in real estate," he said in an interview. "They sell buildings. But investors don't want to buy buildings. They want to buy a strategy."
Among real estate firms that have used the platform to list investments so far include Luxembourg-based Corestate Capital Group, which is offering investment in a €125m portfolio of 21 German retail properties, and Luxembourg-based Aerium, which is offering an office redevelopment project in central Berlin.
For investors, access to the platform to browse potential deals is free. Investing in an equity deal will cost 3pc upfront and management fees of up to 1 percent per year. Upon a successful exit of the investment, investors pay BrickVest a 10pc performance fee. Or, if an investor chooses to sell their stake over BrickVest before the investment period is finished, there will be a 1pc fee for listing the stake.
For debt investments, the investor will pay a 1pc annual management fee. Developers and property companies can list investments over BrickVest for free, but they must agree to allocate a certain percentage of their deals to the startup. The company will charge a 0.25 percent annual fee to cover the cost of rating the investment. And in the case of debt investments, the borrower will pay a 3 percent upfront charge.
"There are no hidden fees here," Lumineau said, suggesting this is an improvement over private equity funds and real estate investment trusts, which often pass overhead costs on to the portfolio investments in ways that may not be transparent.
Global Founders Capital, the venture capital arm of Germany's Rocket Internet, has provided seed money to BrickVest along with a group of angel investors. The company plans to raise a Series A round later this year. (Bloomberg)