Published in Ejecutivo on April 2018
Since August 2016, Excem Real Estate, the real estate arm of the Excem Group (Hatchwell family), has been developing investment vehicles targeted at ‘millennials’, specifically three formats: shared apartments for students and young professionals; hostels to cater to young travellers’ demand for accommodation and leisure; and co-working spaces in which to pursue their professional ambitions in a collaborative environment. Excem co-invests in each of these business endeavours.
You are behind Excem Socimi Residencial. What are your business model and your target end user, i.e., what is your customer profile?
We add value because we offer a business model and are not just a REIT. At Homiii, the manager and brand in the student and young professional accommodation segment within the residential REIT, we have combined residential real estate investment know-how with the professional management of student/young professional accommodation. At Homiii, which you will not ends with three “i’s”, referring to i-live, i-study and i-work, we create a form of co-habiting, a modern way of living. There is a lot of demand in this segment, which is scantly professional and needs our value-added. We see student/young professional accommodation as a high-growth segment that goes beyond the tried and tested student residence formula.
For your investors, can you tell us a little bit about your targets and investment metrics?
Our investors are small and large business owners and professionals from major corporations who were looking to invest directly in real estate and found a formula for success in our REIT and business model. Allow me to distinguish between what we have already achieved for our existing investors and what we will achieve for a new investors. We set the company up in August 2016 and in May 2018 we went public on Spain’s alternative stock exchange (the MAB for its acronym in Spanish). Our initial investors earned a return on their investment of 50% before dividends. Our new investors can expect to earn a dividend yield of between 3% and 5%.
And for this same investor base, what can you tell me about the potential market, current yield, default rates, property occupancy levels, etc.?
The results obtained by Homiii have taken the residential REIT’s shareholders very pleasantly by surprise. Here are our current figures: default rate: 0%; yield: 6%; purchase price: 10% discount to official appraisal values; revaluation: 50%; average term of occupancy: 11 months; apartment vacancy rate: 0%.
We have a very specific business model which is generating excellent returns for our shareholders. For fuller information about our endeavour, visit our website at www.homiii.com.
What kinds of properties are you interested in in terms of asset classes, usage, floor space, location, characteristics, etc.?
We only invest in residential property, specifically apartments with an average floor space of 150m2, individual housing units of 200m2 with upside and buildings of up to 2,000m2. Always in central, unbeatable and readily-accessible locations.
Since technology is highly valued by millennials we offer high-speed Wi-Fi connections and free Netflix subscriptions in all of our apartments.
And our customers are pleased with their shared accommodation. According to a survey carried out recently, 71% are very pleased with where their apartments are located (in the best areas of Madrid such as Chamberí, the Salamanca district and the city centre); 90% are happy with the quality of their properties (always refurbished and kitted out); and 86% are pleased with the design (we strive for comfort and user-friendliness).
You have made a lot of progress in a little over a year in business. Can you please describe your current portfolio? Surface area purchased, number of apartments/rooms, etc.?
So far we have purchased 5,000m2 and have 181 rooms under management between the 28 apartment buildings we have bought. Our assets are valued at €21.9 million (RISC criteria). It is also worth noting that we have managed to buy these properties at a 10% discount to their appraisal value. Our idea is to invest €70 million by the end of 2018/19 and to lift that figure to €300 million in the coming years by expanding into Spain’s main regional capitals. Our goal is to have over 3,000 rooms under management in Spain.
We started out in Madrid so as to be able to concentrate in parallel on our stock market listing in May 2018, thereby meeting the two-year deadline for listing these investment vehicles and complying with the other regime requirements.
Despite your short time in business, you are proud of your end customers’ satisfaction levels. Can you tell us more about their feedback and, specifically, why you think your tenants are so happy?
We have published our tenants’ feedback on our website (www.homiii.com): close to 80% are happy with the location, quality and decoration of their accommodation. The injection of professional management into the student and young professional accommodation segment is generating quality and adding value. Homiii offers individual rooms in rental apartments. Customers can use the web engine to search by area and apply a series of filters in order to find good accommodation for an average of €500 a month. We work hard to make sure that all of our apartments are always in optimal condition and that our tenants’ experience at this crucial stage of their lives is positive. During the real estate crisis many investors and property managers saw the value of their properties decline with little chance of selling them or finding long-term tenants. The lease of rooms in shared apartments is on the rise because more than one million students and young professionals are looking for permanent accommodation in cities in order to take courses or look for work away from their home towns.
I saw that there was a sort of ‘flat rate’ for rent but that the sector was not being professionally run, not generating added value and, above all, failing to offer certain minimum standards. The way young people live has changed. Mobility is much higher and these individuals want comfortable homes. We offer them quality, spaces they can share with other young people and permanent service in the event of incidents. I have seen poky rooms, old apartments, defective facilities that nevertheless got rented because there was no benchmark in the market. We are the image a student or young professional takes with him or her in the time they spend with us. That is why management quality lies at the heart of our business model.
I always come back to the same anecdote: my daughter had to lay her own floorboards in an apartment she rented in the Netherlands; lax rental conditions are widespread and a good reason to believe in what we are doing at Homiii.
Our aim is to provide quality and value-added. Finding accommodation in a new city is crucial if the experience as a whole, whether for studies or work, is to become a period to look back on fondly.
What are some of your specific goals for 2018, besides the IPO?
To continue to demonstrate that the rental segment can benefit from professional management. To continue to pay close attention to our customers, learn about their needs and goals, so that Homiii feels like a home away from home, offering new friends to live with and happy memories. And for investors looking to invest in real estate, we offer certainty, as our figures can already attest. We plan to consolidate Homiii as a benchmark in the shared accommodation rental segment for youths and to continue to fine-tune our business model.
Excem Real Estate was set up in 2016. What drew you to the project and to what extent was your decision shaped by the opportunity to work with the prestigious David Hatchwell? Tell us about your professional track record.
Before 2016, when we started up Excem Real Estate, I was already involved in the management of properties for investors. I was familiar with the private banking investor profile. In earlier years I had had investment and private equity firms as shareholders and had developed businesses in Brazil, Italy, Nigeria and the Dominican Republic, some but not all related with real estate.
The relationship with Excem and the Hatchwell family was a natural process. Excem was launching its real estate division and I was getting started on the Homiii model.
You might say that “we were speaking the same language just as our paths crossed”. Joining forces always adds value when the objectives are shared. That’s why we teamed up and are backers / founders of this endeavour.
My professional trajectory is punctuated by management and the start-up of my own businesses, acting as manager, shareholder and investor. I have set up businesses that were ultimately sold to major multinationals, I have innovated with start-ups; I set up a ski station; I generated investment projects in Latin America; and, most recently, I launched and developed Homiii.
It is my belief that our business should be daring, for us and for others. A good example of this tenet is the collaboration between Homiii and ProFuturo on the provision of education in poorer countries, the project for digital skills training for disadvantaged children and teenagers backed by the Telefónica Foundation and the ‘la Caixa’ Bank Foundation.
What we do is make a €1 contribution, which is deducted from room rents, on behalf of all of the Excem residential REIT’s young tenants. The project has been coined “1 euro of future” and the proceeds go specifically to help fund ProFuturo’s work in Luena (Angola). We and our customers are very fortunate, which is why we strive to foster these values among our students and young professionals so that they learn that by helping to educate others they can help make the world a fairer and better place to live.