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Family offices partner for new investment club

A London-based co-investment platform has formed a new pool of capital through which family offices can invest together in commercial real estate in Europe.

A new platform through which family offices can co-invest directly in properties in Western Europe has been launched in London. The investment club, which will be called the Family Office Real Estate (FORE) Partnership, is expected to comprise 15 to 20 family offices, with the founding club members and the size of the initial equity pool to be announced later this month.

“Traditional investors, such as leveraged property and private equity funds, are becoming side-lined,” said Basil Demeroutis, managing partner of FORE, in a statement. “Family offices are cutting out the middlemen and creating their own investment ideas, often in partnership with one another.”

Of the roughly €115 billion of commercial property that traded last year, private investors, which include some 6,000 family offices around the world, accounted for a greater percentage of investment volume than any other time in recent history, according to FORE. Billionaires, working through family offices, are now among the most significant players in the European commercial real estate market and are seeking higher returns in a more transparent way and at a lower cost than through traditional funds.

Family offices typically have been limited to investing in real estate indirectly through a listed or private fund or investing directly in the asset class on their own.  The potential downsides of a fund investment, however, are the lack of control over the investments, high fees, low transparency and the difficulty of exiting from deals.

Investors in the new club cannot opt out of deals individually, but can exercise discretion to pull a deal if the transaction lacks sufficient support from the group as a whole. “In the end, we are looking for like-minded investors that share the same values, if not similar investment views, so we feel comfortable that we are sourcing and executing investments that they, like us, find represent compelling long-term value,” Demeroutis told PERE. “So we expect each deal we present to be closed and funded.”

FORE’s investment strategy focuses on office, retail and industrial assets, as well as multifamily properties, in the UK and Germany. Each property will have a detailed business plan at underwriting, and the plan will include a target holding period and an exit strategy. Also, the partnership will have a mechanism by which control over the sale is handed back to the club members in certain circumstances.

Club members will share the cost of operating the platform, and pay about half the fees of a traditional real estate fund. The partnership's principals will be responsible for sourcing investments, due diligence, negotiating deals and managing the assets. Compensation is back-end weighted, with performance fees only paid on final sale.

FORE is led by Demeroutis, who previously was a partner at Capricorn Investment Group, a Palo Alto, California-based family office with more than $4.5 billion in assets. At Capricorn, he oversaw the firm’s global real assets portfolio and overall European business. Other partners include Peter Dove, who has managed large portfolios for RREEF and Henderson Global Investors and will serve as head of asset management, as well as Simon Kitching, who will act as head of investment.