Jagdeep Kapoor, Managing Director of Amberlake Partners, points out one of the differentiating factors of his company: investment products with commercial real estate as an underlying asset.
You mentioned in a previous interview that your differentiating factor is the creation of financial products linked to commercial real estate. Can you tell us more about this?
Indeed, investors looking for yield have very few solutions in this environment of base rates and accelerating inflation. That's why at Amberlake Partners, we create our own investment products with commercial real estate as an underlying asset.
In our experience, the commercial real estate investment offer is not very well represented in the context of private client asset management. Our aim is to provide them with an institutional-level offering.
What is your experience in this field?
I have 23 years of experience in commercial real estate. During my career I have participated in a transaction volume of 7.7 billion in Western Europe. As a result, I now have access to transactions that are usually reserved for institutions. My clients included pension funds. At Amberlake Partners, we have the ability to take advantage of these investment opportunities and through securitization, to include them in the portfolios of our clients under management.
Could you give us an example of a typical transaction?
Of course, my strategy has always been sale and leaseback. We go to large companies with a very good credit profile and offer to buy their buildings so that they can occupy them on a lease basis afterwards. This gives them access to cash that they can reinvest in their core business. These future tenants always commit to a long lease term, usually over 10 years, and the rent is indexed to inflation. This greatly responds to a very current concern. Rents are paid quarterly, which allows us to pay a regular coupon to investors.
Expected returns are around 5% before leverage. Our structure also includes a bank financing component that allows us to obtain returns above 7% net annualized.
We generally work on transactions of 20 to 100 Mios Euros, in order to form a club of 1 to 10 clients to invest with us.
We select a property from a large number of offers available to us, as a recognized player in the European commercial real estate sector. We bring together the interests of one or more clients to create a Club Deal. We then set up a Luxembourg structure, which allows the issuance of an ISIN code due to its securitization. The investor is then free to buy this security through his private bank. We also take care of the entire life of the product.
What are the advantages of such a solution compared to a bond investment?
We see this type of investment as an alternative to bond products. Indeed, by buying a good credit bond, the investor currently receives a return close to zero. This same company uses premises, for which it pays a rent corresponding to a yield higher than 5%. Moreover, this rent is indexed to inflation and to the priority of payment.
The Worst Case scenario is also much more favorable, because in all cases, even if the tenant leaves, the building still belongs to the investor.
Is this offer open to other players in the market?
We offer the various opportunities primarily to our clients, but we are quite willing to co-invest with other management companies or private banks.
