Individual mandates for real estate management as a service in high demand
Credit Suisse Asset Management Global Real Estate is managing a growing number of real estate portfolios for third-party clients. This year, as a counterpart to the long-established international mandate team, Real Estate Switzerland has set up a dedicated specialist team with a focus on Swiss mandates.
There are many reasons to award a large property portfolio as a mandate. It is often the case that businesses, such as pension funds or insurance companies, own large real estate portfolios, but do not always possess specialist real estate expertise. They focus primarily on the management side; in other words, tenant management and refurbishment work. That means that the potential of the real estate portfolio is not fully utilized. After all, professional and active real estate management goes far beyond mere management, and also includes aspects such as investment and divestment strategies, transaction management for building acquisitions, and sustainability management.
A growing number of owners of larger real estate portfolios are showing an appreciation for the added value of professional and comprehensive property management. To cater to this increase in demand for individual mandates, Global Real Estate has continued to expand the ranks of its team of advisors.
A growing number of companies are choosing to have their real estate portfolios managed externally. Raymond Rüttimann, Head of Global Real Estate and Head of Real Estate Switzerland at Credit Suisse Asset Management, has seen an increase in this trend over the past twelve months.
Mr. Rüttimann, recently a major pension fund entrusted the management of its entire Swiss real estate portfolio to Real Estate Switzerland. What were its reasons?
Raymond Rüttimann: There are various reasons why you might choose to award a mandate. In recent years, a large number of companies and pension funds have been investing in real estate. However, in most cases, real estate management is not one of their core competencies, which is why they are not able to perform the full range of challenging tasks involved in professional real estate management. But there can also be other reasons why they do not want to undertake operational portfolio management. This is why companies are increasingly awarding mandates to external partners that offer the full spectrum of services – from portfolio management and asset management through to transaction and construction management.
How do companies benefit from awarding a mandate to Real Estate Switzerland?
We are a leader in the mandate business. Clients benefit from our specific real estate knowledge and our long track record of expertise. Managing a real estate portfolio optimally from a tax perspective, for example, requires a great deal of specialist knowledge. Appropriate resources are also required to manage a larger real estate portfolio consistently and profitably. Many companies have only one or two people for that. We, on the other hand, can fall back on the expertise of our 80 or so experts when required and enlist their services in a flexible manner. Not only that, but for the past 15 years or more, we have considered sustainability factors within the real estate sector – and this is an extremely central issue in the real estate business.
Which clients award mandates?
For the most part, they are institutional clients such as pension funds or insurance companies. But public sector institutions and family offices are also increasingly looking to award mandates. The minimum size of portfolios that we look after is around CHF 500 million. It is also possible to have smaller portfolio sizes at the outset, as long as targeted portfolio expansion is on the agenda. A certain volume is required to make a mandate financially appealing for both sides.
Are there other criteria that a portfolio has to meet?
Mandates are customized solutions per se. We do not specify any fixed criteria, but rather we examine all inquiries on a case-by-case basis. Our mandates currently focus on mixed portfolios – in other words, a larger percentage of residential properties supplemented with commercial properties. One exception to this is Central Real Estate Basel’s portfolio. In this case, we work within a consortium of experienced real estate specialists to assist with the development of Switzerland’s largest development site.
How has demand for mandate solutions like this evolved?
An increasing number of companies are considering awarding external mandates. This was not the case a few years ago. In the last two years – and quite noticeably over the past twelve months – we have seen a large number of these kinds of inquiries. Our mandate portfolio has grown by 20% in the last twelve months alone and we want to continue expanding our position over the coming years. The total volume of Swiss real estate assets managed on a mandate basis currently stands at more than CHF 15 billion.
- A discretionary mandate gives Credit Suisse the right to manage some or all of clients’ funds on their behalf.
- Returns on discretionary mandates depend on the asset classes and market assessment.
- There is no guarantee of returns.
- Investors may lose some or all of their invested capital.
- Liquidity can fluctuate depending on the product and market conditions.
- The key risks of real estate investments include changing mortgage interest rates, subjective valuation of real estate, inherent risks with respect to the construction of buildings, and environmental risks (e.g. land contamination).