Billionaires Hunt Real Estate Bargains, Boost Equity Allocations

This content was published on July 16, 2020 - 13:39

(Bloomberg) -- David and Simon Reuben aren’t letting the pandemic curb their real estate ambitions.

Since the crisis began, the British billionaire brothers have made a push into Madrid’s residential market, bought almost 90 hectares (222 acres) of land in Spain’s Balearic Islands and acquired Manhattan retail property near Rockefeller Center from SL Green Realty Corp. for about $170 million.

Other wealthy investors are exhibiting a similar appetite for real estate. Almost half the 121 family offices surveyed by UBS Group AG are looking to increase their allocations to property as they hunt for opportunities and potential bargains, according to the Swiss bank’s Global Family Office Report 2020. The firms also expect to be more aggressive in putting their cash to work, with more than a third saying they plan to boost equity allocations.“Covid-19 has reconfirmed that diversification is the game to be in,” Josef Stadler, head of UBS’s global family office unit, said in an interview. “Real estate has always been an asset class for diversification, and it obviously has reconfirmed its status.”

Slumping property prices in the pandemic’s wake have created opportunities for cash-rich investors with long-term outlooks, and few have horizons longer than family offices. The lightly regulated investment vehicles aim to grow fortunes across generations and have fewer constraints than institutional firms.

Lockdown measures initially froze real estate markets, but many nations are now reopening their economies even as the virus resurfaces in some locales. With the pandemic introducing uncertainty around long-term demand for office space, the wealthy are increasingly targeting residential property, according to Stadler.

”A lot of private wealth is looking to generate returns they can live on, or it’s a wealth-preservation play,” said Alex James, head of private client commercial advisory at real estate broker Knight Frank. “By buying prime assets in global cities, they hope their investments will hold up their wealth.”

Many of the world’s rich from Zara founder Amancio Ortega to billionaire banker Joseph Safra have long favored real estate, an asset that offers stable cash flows, tax breaks and leverage opportunities. Private investors including family offices made up about a third of real estate investments worldwide last year, according to Knight Frank.

David and Simon Reuben, who didn’t respond to requests for comment through a spokesman, built a fortune trading metals and later invested in real estate, leisure interests and technology companies. They have a combined net worth of around $12 billion, according to the Bloomberg Billionaires Index.

As part of one property deal completed during the pandemic, they plan to build 650 homes and a hotel in an exclusive neighborhood an hour from Spain’s capital. Potentially reshaping their fortune further, they’re also involved in a takeover of Premier League soccer club Newcastle United.“The pandemic has been hard on many investors,” said Harco van den Oever, founder and chief executive officer of London-based art fintech firm Overstone. “Ultra-high-net-worth individuals who have not spread their exposure across different asset classes may now be learning about the importance of diversification the hard way.”

(Adds data on equity allocations in third paragraph, Knight Frank comment in seventh.)

©2020 Bloomberg L.P.

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