Hans & Franz are strolling through the woods, when they find a teeny tiny machine. They pick it up and take it home. At home they find instruction papers attached and understand that this machine can produce teeny tiny houses. They start producing a few of these teeny tiny houses and gift them to their relatives and friends. The people love those teeny tiny houses and want more and more of them. “Wow Franz! We can make a business out of this!” Hans says, and so they do. First only selling a few houses per month, soon the machine runs around the clock and produces teeny tiny houses that are sent all around the globe. Business grows and grows, soon they replicate the machine to increase production and employ dozens of employees. Both Hans and Franz make millions and become celebrated entrepreneurs. However, one day, Hans and Franz get bored and decide to travel the world. Six months later, they return home and find their business bust and all their belongings seized. “What happened to our business, Franz?!” Hans said. “No Idea, Hans”, Franz replied.  

There are various possible reasons that could have led to the downfall of their teeny-tiny-house imperium.  

  • Competition: New competitors could have entered the market. Producing cheaper or at a better quality. Or maybe just doing a better job in presentation or customer management. 

  • Quality decrease: Producing more and more teeny-tiny houses could have overheated the machine into producing lower quality, leaving customers dissatisfied or even redeeming their products.  

  • Supplier issues: Quality of supplies, timing of supplies etc. 

  • Market satisfaction/Consumer behaviour: Why have teeny tiny houses when there are teeny-tiny dogs? How many teeny tiny houses do you really want? 

  • Massively increased production led to soaring replacement costs and downtime, with a heavy impact on profitability effectively destroying the business case 

Understanding (i) what drives your business, (ii) where the value is generated, (iii) where the risks lie, while (iv) keeping an active eye out for competition, are crucial to formulating a business plan. However, translating this into the real estate industry, poses a few issues – it’s not so easy to go back into the past and help Franz and Hans! But we sure can try….  

Let's take a closer look at the issue:  


Simply put, real assets are highly heterogenic, they are not replicable, and their value is often directly linked to their location or respective local economics and regulations. Finding a consolidated approach to value generation is highly complex.  


The first step towards pulling down these barriers was, the invention of commingled institutional real estate funds. This allowed a much wider range of small and mid-cap investors entry into the complex market. Next, the Launch of the Euro took away a lot of the currency risk across the European market. The possibility to invest internationally and build diversified portfolios via specialised managers really built the foundation for a relevant institutional, non-listed real estate market. Last but not least, the low-interest rate environment fuelled investors’ appetite for real estate as they looked for an investment alternative and tried to diversify away from equities and bonds.  


New and accelerated investor interest really kick-started an exciting time for the real estate investment business. However, it also created challenges, as the new players in the market and the more professional approach to real estate demanded more consistent and more transparent information on their investments. As each investment manager had its own approach towards real estate. Managers provided a huge variety of KPIs, detail and quality of information, and had their own regional definitions and regulatory understanding. This made it hard for investors to compare funds, and make informed decisions on their investments and investment managers.  


Institutions like INREV were formed to address this issue. Investment managers and investors joined forces to address this issue and ease the flow of more capital into the sector. In this effort, they developed the INREV guidelines as a combination of “best practice” and “compliance” standards. Today, INREV offers a publicly available set of widely accepted definitions and standards. They also offer regular in-depth trainings on various subjects regarding real estate in order to drive further professionalisation of the sector. This process of a more and more standardised and professionalised RE market is constantly evolving and still far from completed.  


The harmonisation of definitions and KPIs across the company is a constantly evolving topic. It can prove difficult as each investor will have their own history with PATRIZIA, or the respective acquired company, regarding their specific reporting demands which cannot be changed or adapted over-night. However, in growing together as a company and the combined effort to increase efficiency across our growing AuM, further standardisation and automatization is crucial to achieve our Business Plan.  

A big step towards this goal to truly become ONE-PATRIZIA was reached in 2022. Under the leadership of Gertrud-Bengler-Bedi, professionals along the whole PATRIZIA value-chain worked on creating a dictionary for KPIs and definitions that can guide PATRIZIANs from all around the globe. You can find it here: PATRIZIA Terms and KPI Definitions (sharepoint.com) 

Apart from the benefits for investors and towards reporting, a clean and standardised set of regularly updated KPIs can also allow us to compare ourselves against our competitors and the wider RE markets. This is essential for understanding the drivers and sensitivities of our own portfolio’s performance and helps in supporting and quantifying our investment decisions. Identifying these relevant KPIs on a company level and quantifying our comprehensive investment experience as a company, allows us to leverage this experience into better decision making on all levels of investment.   

The journey is far from over, but we are working and will continue working until we can make sure we can leverage our experience and knowledge into better decision making on all levels of investment. This will put us in a good position to stay on top of a market that has to continuously adapt to new regulation, standards of measurement (e.g. ESG criteria) and “new” asset classes with an increased operational aspect.  

Hans and Franz, being the entrepreneurs they are, in the meantime have started a new business in the Cryptocurrency space. Have they learned from their experience? Unclear! Can we learn from their example and our own experience as a business and as an industry? Yes, we can! 

Try to remember poor old Hans & Franz when facing the challenges and opportunities ahead, and find out more via the links to our KPI group and the INREV website! Wishing you all a great start into the new year! 



About the author:


Georg Kläger is a Senior Associate with the Performance Analytics Team in the Investment, Strategy & Research department at PATRIZIA SE, a position he has held since the spring of 2021. In that role, he supports the team in its efforts to move from Performance Measurements into Performance Analytics as integral part of the Research function. He is based in Augsburg Germany, the PATRIZIA headquarters. He was formerly employed as a Management Trainee working 2 years across several functions of the company, including Asset-Management, Transactions and Fund Management. Holding a Double-Master’s degree in Real Estate from both the Henley Business School Reading and the International Real Estate & Business school in Regensburg, he has also worked & studied in Croatia, the United Kingdom and Denmark. 

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