Independence means responsibility
At first glance, that can seem somewhat contradictory. Can one of the leading real estate investment companies in Europe really operate completely independently, with all the freedom it wants? Is it not inescapably dependent on its customers, banks, all kinds of business partners and ultimately even its market environment? Of course it is. But independence the way I interpret it doesn’t mean operating in a vacuum, assuming no responsibility and just giving in to personal preferences. Quite the opposite: one condition of independence is a strong sense of responsibility. Indeed responsibility is a necessity in order to work with customers and other businesses as a partner of equals and succeed in the market in the long term – sustainably in its true sense.
What makes PATRIZIA independent?
First and foremost, we’re not integrated into a corporation. We’re an independent, owner-managed company which is listed on the stock exchange. So we do not have to sell products that just happen to be in the in-terests of the corporation. Instead we can advise our clients independently. What this means in practice is that we place investments with them that open the door to strong revenues. In so doing, we’re open to all kinds of occupancy scenarios – from offices to retailing, res-idential and even hotels and care homes. We’re also open to different kinds of risk categories – from core to value-add and opportunistic. And we’re open to doing business in a variety of countries – from Germany to Finland, Ireland and the Iberian peninsula. Whether it’s an office complex in Scandinavia or a specialist outlet centre in Germany, flats in the Netherlands or retail properties in Spain – we always recommend properties and developments to our customers where we perceive the biggest value enhancement.
Ultimately, the thing to understand is that the thinking that underlies the approach taken by PATRIZIA is a bit like the thinking at a pension fund. We think in the long term, in generations. And we treat the money
people entrust us with as if it were our own. The only difference to a pension fund is that we only invest in property – as mentioned, across Europe, in all asset and risk categories, and only through our own local employees. Independence also means that we recommend an investment structure to our clients that is best suited to their own plans. This could be a special German fund, even an investment vehicle based on Luxembourg law or an open-ended French OPCI. Then there is an aspect that I consider particularly important: we are independent from banks. So we’re not obliged to sell the financing of a particular financial institution to our customers. Instead, we work with around 80 banks and choose the ones that offer the best terms for each specific investment. This network of 80 partner banks is also a valuable opportunity to forge contacts with other business partners and thus generate new business.
Independence requires confidence
The way I see it, independence takes the courage to believe you’re right. We don’t tell our customers what they want to hear, we advise them independently. This sometimes means saying no. For example, we won’t work unconditionally on every investment in every asset class in every country. Our principles are simple: first, we need to be convinced about the market, the opportunity and the long-term prospects. Then we seek competent specialists in that market, people ‘on the ground’ who have intimate market knowledge. When both of these factors have been addressed, we offer our customers the possibility to find properties and enter into purchase negotiations – then and only then. Not in any other order. So we will also not go and invest in micro-apartments in secondary cities in France just because micro-apartments in French secondary cities are suddenly en vogue. We will only do this if two conditions have been met. First, after conducting a market analysis, we’re confident that these little flats will be a success in the medium to long term in those specific locations. Second, we have specialists involved – people who know about micro-apartments.
Independence enhances value
The fact that having the courage to be independent produces pleasing results for our investors can be seen by the example of the property firm LBBW Immobilien. The company owned around 20,000 flats and we acquired it in 2012 on behalf of a consortium of investors. In 2015 we sold the firm, meanwhile called SÜDEWO, to the company now known as Vonovia after it made us an extremely attractive offer. Although we exited from the investment much earlier than was envisaged in the original business plan, we delivered genuine value enhancement for the investment consortium. Had we been a pure asset manager, we would most certainly have not attempted to complete the sale, as that would have meant losing the asset management mandate. As an investment company that takes a holistic approach, we also think one step ahead: by securing good business for our investors, it becomes more likely that that they will do business with us again in the future.
Independence takes trust
This long-term approach to business relationships is an intrinsic part of our independence. Our investors know that we have the DNA of an investor running through our veins. It’s important to us that we invest the money of our investors as if it were our own money. Doing quick deals without regard for the possible long-term implications is not the way we do things. That’s because we plan to stay in the market and want to know we can keep looking our investors in the eye once a transaction has been completed. So we will never – and I mean never – put our reputation on the line for the sake of short-term success. What that also means is that we remain conscious of our social and societal responsi-bility. For instance, when we sold SÜDEWO we looked extremely carefully at its new owners to ensure they would fulfil all commitments to tenants – obligations that stemmed from a social charter originally signed by us. After all, we don’t dice with private equity; we’re not a gambler who sometimes sits at this table or that and then quickly makes an exit if things start looking doubtful. We know that property is a long-term asset that shapes our society and all kinds of people, so it has to be dealt with responsibly.
To preserve our independence we have to be strong in financial terms. You cannot be independent without the right equity, which has to be as solid as a rock. You also need the right strength to survive times of turmoil in the market. If you’re adaptable, you can also pull new projects on board quickly – projects of the right magnitude. This is why PATRIZIA has been growing continuously for years and why it has continued to enter new countries and fields of business. By doing so, we have earned the trust of institutional investors and, in turn, this has made new investors aware of us. So growth is no end in itself, it’s the means by which we remain independent. On a fundamental level, standing still is not an option anyway. This is something that has been underscored time and again in the past. By developing with the market and gearing yourself to the challenges of tomorrow, you can remain independent in the long term and make a success of it. But this is only possible if the best arguments are also the winning arguments – independent of rank or name, irrespective of hierarchies. This requires an atmosphere of trust, which of course also paves the way for a positive culture of conflict.
There’s no sure-fire formula for independence
Independence is hard work. It’s a never-ending challenge. And it means making a deliberate decision and coming back to that decision time and again, every day. So it’s crucial to be focussed on your goals and be particularly aware of your own strengths. So you don’t just have to believe you can do it, you also have to believe in yourself. Because if you don’t believe in yourself, you can’t believe in (and place trust in) others – and thus also gain the trust of others.
Just to emphasise this once again: we don’t have to do anything. But, there are many things we want to do. We want to be the best partners for our investors and we want to become established in the long term as one of the leading investment companies in the European real estate market. Independence has already brought PATRIZIA a long way in this respect, because independent partners are strong partners. And you can only depend on strong partners.
