Former Lehman Brothers banker Thomas Schneider has launched a new online real estate investment platform enabling small investors to take part in club deals which were previously only available to institutional funds.
Schneider has been working on the idea over the past two years, but the platform – called BrickVest - only went live five months ago, aiming to plug what he sees as a very real gap in the market.
‘BrickVest is an online real estate investment platform for investors who are too big to buy into retail funds, but too small to bid for big-ticket deals on their own,’ says Schneider, who holds the post of CIO with the platform. ‘I got the idea two years ago, when I was experimenting with crowdfunding. People tend to think we’re a crowdfunding enterprise but that’s not exactly how it works,’ Schneider adds.
‘These days, crowdfunding opportunities in real estate definitely help smaller investors get involved in deals. But I noticed that there’s a very specific gap in the market, namely for small investors that want to invest between €50,000 and €5 mln a year in commercial real estate,’ he explains. ‘I worked at Lehman Brothers and saw that investors needed €5-10 mln per ticket to get involved with the major deals, which were only really open to investment banks and pension funds. So I decided to found a company which would solve that problem.’
With over 12 years of experience in real estate investment, Schneider was most recently founder and CEO of private equity player Limmat Group and worked at Lehman Brothers, KPMG and Ernst & Young in the past, focusing on property. Schneider says that the BrickVest name was inspired by the industry’s digital direction.
‘The key thought behind our name is that because of technology and our innovative approach it is now possible to invest in real "bricks & mortar" with a click of a button in the same way as investors have been buying stocks and bonds for years, so in a way our company name reflects exactly that - invest in bricks & mortar,’ he explains.
By pooling money on behalf of investors, Schneider is able to create an entry volume for bigger deal opportunities across Europe, avoiding the lack of transparency and excessive regulation which he reckons surrounds retail funds.
‘We take 10 smaller investors and combine them, so together we can get access to the big deals,’ he says. ‘That way, we’re able to offer the same terms that institutional investors have.’
‘We currently have nearly €4 mln of commitments from the first wave of investors and we have deals to the tune of €60 mln available on our platform, plus we are currently trying to raise €30 mln for another transaction. We’re confident that numbers will just keep growing as more and more investors discover us and like what they see.’
In terms of portfolio management, each investor can select from several investments across the platform and decide their own exposure - to a degree. ‘Our platform provides specific information about the assets available and you can choose exactly which you’re going to invest in, putting together your own portfolio directly, whether that be shares in a hotel in London or a portion of an office block in Berlin,’ says Schneider.
‘Another key aspect to our investment strategy is that we only take minority positions in the properties we invest in. Why? Because it limits our risk exposure if we have multiple small stakes, but also because we prefer to invest in properties where big, institutional players have the lion’s share as that builds in security for our clients. So for example, for one of our London deals, Pramerica is the lead investor, and if there are ever problems with a deal, these kinds of players have the strength to find solutions. We also recognise that if they’re investing in the property, they’ve also done their homework and as a majority investor, believe that it’s worth putting a lot of money into that asset,’ he adds.
‘Of course, that does mean that when it comes to asset management, we don’t really have a say in how those properties are managed. Again, we are partnering with strong lead investors also because they have active asset management strategies and the right teams in place to recognise what needs doing.’
Schneider says he’s providing a tool which he himself would have liked to have used. ‘I also launched BrickVest because earlier in my career I would really have wanted a platform like this to have existed – I would have put my own money into it. I’ve worked my entire life in real estate but I’d never invested a cent in it up until now, because although you can buy your own house, an individual just can’t access these kinds of commercial real estate deals.’
Investments in the fund have fixed durations, but Schneider says that they aren’t actually illiquid.
‘We have a secondary market option, so you can resell your shares in the property and don’t have to wait for the lifecycle of the ownership to complete,’ he explains. ‘We’ve already resold €1.5 mln of shares and that’s also where the blockchain technology we use kicks in. This is a way of exchanging stocks between different jurisdictions electronically, rather than having to get notaries physically involved in each territory, whose fees would make some small deals impossible. The evolution of our blockchain capabilities will eventually create an extensive share-dealing platform of its own,’ he adds.
Remi Antonini, the former global head of Goldman Sachs, has just been hired to grow the research side of the business. Schneider: ‘We’re very happy to get an expert on board of that calibre,’ he says. ‘In order to have a liquid, secondary market, we need to have a proper ratings structure. We therefore need correct rating tools, and Antonini brings the expertise to be able to set that up.’
As for the future, direct investment is only one part of the business in evolution: the platform also offers a capital-raising option for potential deal sponsors. ‘We’re also in mezzanine funding, so I’ll be announcing our first big mezzanine deal in the next couple of weeks which is going to broaden our scope still further,’ Schneider says.
