Quil­vest loves Blom In­vest

A new part­ner­ship hopes to bring in smart in­vest­ment

Executive Magazine - - Finance Banking - By Thomas Schellen

It is a reg­u­lar ro­mance. Quil­vest, a global wealth man­ager, and Le­banon’s BlomIn­vest Bank have tied the knot with a new prod­uct part­ner­ship, al­low­ing the Le­banese bank’s wealth man­age­ment clien­tele to buy into Quil­vest deals via a spe­cial pur­pose ve­hi­cle called the BlomQuil­vest Euro­pean Real Es­tate Fund. The two are team­ing up for the sec­ond time in three years to mar­ket in­vest­ment op­por­tu­ni­ties. The dif­fer­ence from their first col­lab­o­ra­tion, which was a l’Amer­i­caine, is that the cur­rent ar­range­ment is fo­cused on Euro­pean prop­erty in­vest­ments.

“What is most im­por­tant in our re­la­tion­ship is that the very spirit of [both] Quil­vest and the bank are very much alike,” says Marc Manaster­ski, part­ner and global head of the real es­tate unit at Quil­vest. “BLOM has a fam­ily ap­proach to busi­ness and we have the same,” he adds and it­er­ates a line from the Quil­vest Group’s cor­po­rate nar­ra­tive to ex­plain how the group is distin­guished from the hoi pol­loi of fund man­age­ment by al­ways com­mit­ting its own im­por­tant eq­uity stakes into projects. Ac­cord­ing to Manaster­ski, Quil­vest does not pri­or­i­tize fund man­age­ment fees as its rev­enue source. “We are in­vestors be­fore we are fund man­agers,” he en­thuses.

For Fadi Os­seiran, the gen­eral man­ager of BlomIn­vest, it was en­light­en­ing to see how the in­vest­ment opin­ions on both sides moved in sync. “We said, [this is] great, we see eye to eye,” Os­seiran ex­plains, re­fer­ring to how he saw that Quil­vest was tar­get­ing the United States at the same time when the BlomIn­vest team thought the US was the ticket three years ago. They also talked about Europe just as BlomIn­vest was look­ing to in­vest there, given the weak­en­ing Euro and cen­tral bank ef­forts to stim­u­late an eco­nomic turn­around.

Another en­tic­ing el­e­ment of con­ver­gence was the all-im­por­tant per­spec­tive on risk, Os­seiran says. “Peo­ple are greedy,” he elab­o­rates. “When­ever they are ap­proached with promised re­turns, they don’t look at risk. We have al­ways a lot of op­por­tu­ni­ties when funds come to us but when we pick a fund, we don’t just look at the per­for­mance, which shows only the growth but not the risk. Look­ing at Quil­vest we saw a fam­ily fund that has a track record of 70 years of in­vest­ing its own money di­rectly. Our cul­tures are very sim­i­lar in terms of risk mit­i­ga­tion.”

LOOK­ING TO EUROPE

The Blom-Quil­vest Euro­pean Real Es­tate Fund is seek­ing to ac­cu­mu­late $20 to $30 mil­lion in in­vestor money and de­ploy in­ter­est­ing amounts into se­lect projects in Euro­pean cap­i­tals and gate­way cities. Projects will gen­er­ally not be new de­vel­op­ments but con­sist of prop­erty ac­qui­si­tions tar­geted for re­fur­bish­ing and repo­si­tion­ing, aim­ing for an­nual re­turns of 12 to 13 per­cent. Ac­cord­ing to Manaster­ski, the monies will be de­ployed over two years and the hold­ing pe­riod of the in­vest­ments will be about four years, aim­ing for liq­ui­da­tion by 2020 or 21, with in­terim in­come de­liv­ered in the mean­time. He em­pha­sizes that the in­vest­ments will be in the low-risk Euro­pean en­vi­ron­ment, but will of­fer premi­ums of 900 to 1000 ba­sis points (bips) when com­pared with re­turns achiev­able from high-qual­ity sov­er­eign bonds that yield less than three per­cent.

“The strat­egy in the cur­rent part­ner­ship is not to in­vest in funds but only in di­rect deals with pre-iden­ti­fied in­vest­ments; another char­ac­ter­is­tic is that in­vest­ments are in deals that se­cure value cre­ation up­front so that the ex­its are not so ex­posed to mar­ket swings. There­fore, if we do not se­cure the 12 to 13 per­cent, we serve eight per­cent at worst, com­par­ing to the trea­sury bond at 2.5 or 3 per­cent, [rep­re­sent­ing] a 500 bips risk­less type of in­vest­ment re­turn,” Manaster­ski says.

He out­lines his ra­tio­nale for tar­get­ing the Euro­pean prop­erty mar­ket over other in­vestable real es­tate mar­kets around the world. While prop­erty val­ues in the US still have room to in­crease, one has to be cau­tious and very se­lec­tive in the com­ing three to five years to avoid be­ing caught in mar­ket ad­just­ments. Mar­kets in Sin­ga­pore and Hong Kong are very ac­tive, but these East Asian prop­erty en­vi­ron­ments are, value wise, un­der the in­flu­ence of China. The coun­try, in Manaster­ski’s view, is in a phase of no de­vel­op­ment which he specif­i­cally at­tributes to the Chi­nese gov­ern­ment’s anti-cor­rup­tion drive that has hit de­ci­sion mak­ing in state-owned en­ter­prises. Latin-Amer­i­can prop­erty mar­kets in turn are slug­gish be­cause of the de­pen­dency on Chi­nese de­mand by most of the con­ti­nent’s economies.

For BLOM clients, the Blom-Quil­vest Euro­pean Real Es­tate Fund is ac­ces­si­ble on a re­tail level, Os­seiran says. But that is re­tail in a man­ner of speak­ing, to the value of a $250,000 min­i­mum ticket size com­pared to the mul­ti­mil­lion dol­lar par­tic­i­pa­tion re­quire­ments that Quil­vest usu­ally im­poses as an en­try bar­rier. “We use the word re­tail as op­posed to the min­i­mum ticket of $5 mil­lion or $10 mil­lion,” Os­seiran clar­i­fies.

Given the Blom-Quil­vest fund’s min­i­mum ticket size of $250,000, the au­di­ence for buy­ing into the fund seems des­tined to range in the dozens and not in the hun­dreds of clients. Os­seiran says he ex­pects that re­spon­dents to the fund of­fer­ing will com­prise per­haps sixty per­cent of clients who al­ready use BlomIn­vest. This would give the bank im­por­tant op­por­tu­ni­ties to ap­peal to wealth clients that have ties with the par­ent, BLOM Bank, and to ap­proach po­ten­tial new clients in the mar­ket place where the BlomIn­vest Pri­vate Bank­ing unit com­petes in Le­banon with the likes of Audi Pri­vate Bank, the Saradar Group, and FFA Pri­vate Bank.

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