Billionaire Fait is opening a specialized real estate fund
Date: 27 July 2020
Author: Jaroslav Mašek
Photography: David Turecký
Financier Igor Fait, the 82nd wealthiest Czech according to this year’s Forbes ranking, is opening a real estate fund, Jet Real Estate, focused upon industrial real estates. He wants to begin with CZK 1 billion in autumn, and over time he should invest up to CZK 15 billion. The aim, though, is not to develop industrial halls only, as do, for instance, the market leader CTP or the Czech company Accolade.
Fait also wants to persuade other businessmen to sell him the real estates within which they operate their businesses. “Taking care of real estates is a completely different discipline than making crankshafts, for example. This is something I want to explain to the market,” says Igor Fait, who is currently relaxing at his residence on Mallorca. “The economy is being tube-fed at the moment. We will not see until autumn how big the crisis will be in reality,” he adds.
In what ways should your real estate fund be different?
We’ve been investing into industry for 20 years, and we know that the business itself of individual companies often has nothing to do with the given piece of property. So, we think that these should be separated. That is common in Germany and in Austria, but here not so very much. It is a completely different type of business to produce crankshafts, for example, and to take care of real estates. I’m convinced that a prudent manager should specialize on one thing.
So we want to offer to businesspeople a partnership wherein we buy their property. This will mean a financial injection into their main businesses. Moreover, because we understand industry ourselves, we also may offer a kind of consultancy to the given company and, naturally, we know how to evaluate the tenant’s creditworthiness because we understand very well what it does and what are its prospects for the future.
So you don’t want to build new industrial or logistics halls but rather to buy properties where businesses operate already?
Yes. We want to specialize in offering existing businesses to separate their real estate from the core business. That doesn’t mean that we necessarily will do only this, though. If we get a chance to develop an interesting industrial park, we’ll go for it.
For the majority of businesspeople, isn’t it simply unimaginable that they would sell the “roofs over their heads”?
Maybe, but this is a big mistake. We will strive to explain to them that if somebody will buy their hall, he will take much better care of it and will understand it better. And when selling a firm, the production is valued in a completely different way than is the real estate where the production takes place. At the time when a business owner will decide to sell the business and the real estate separately he or she will obtain much better prices. So it is advantageous also from this point of view. I understand that Czech businesspeople are not much used to this, and therefore I want to devote myself to education as well.
Do you also count upon helping businesses that got into trouble because of Covid-19 in this way?
This is a more difficult question. We would have to evaluate if we would like to have as a tenant such a firm as has cash flow difficulties and is selling the halls for that reason. This is primarily meant for healthy companies who want to develop faster, for example through using money they obtain from selling their properties. Of course, we will choose. It depends on location, potential for further development or for reconstruction.
How much money do you want to bring into the fund?
It will be a permanent fund for qualified investors. We want to bring in CZK 1 billion from investors by this winter. The goal is to have about CZK 15 billion in 5 years. With financial leverage, which is in such cases around 50%, the value of real estates may be around CZK 30 billion. The minimum investment through Conseq will be CZK 1 million, and for individual investors it is set at CZK 3 million.
You are yourself an experienced investor. What do you think is or will be the influence of the Covid crisis on prices of companies?
I’m afraid that right now the economy is being kept on its feet by a feeding tube providing state money. We will not see until autumn, when this comes to an end, just how big is the crisis. I think that there will be massive layoffs, loans will not be repaid, and it may lead to a number of bankruptcies. This will of course be an opportunity for investors who have cash at the ready. The question is when some recovery will occur and whether the banks themselves might not be affected before that time. Hopefully, I’m not being too much of a pessimist.
How are your companies doing? How big a drop in profits and sales do you expect?
Fortunately, we sold many companies before Covid. In the case of the Jet 1 fund, we exited 80% of them before the crisis. Of the big companies, we kept PBS Industry from Třebíč, which supplies power engineering and is so far not too much affected and hopefully will not be. One-fifth of its sales also is of production for construction machines, though, and there is already a problem there, of course.
So, I expect a decline in sales but hopefully not too great. Our other big firm is the Austrian Hoeckle, which produces crankshafts for combustion engines. This is one is slipping, of course, but it produces mainly for premium (Porsche) and special market segments, where the decline also is not significant.
How are your investors doing? Do they need money and are they withdrawing it from your funds?
Minimally. First of all, it’s not legally possible because our funds are closed. But, because our investors are usually also our friends whom we have known for a long time, we always try to find a solution. Nevertheless, from our 150 shareholders in the Jet 2 fund, about three withdrew because of the crisis. They asked us if other investors could take over their positions, and of course we enabled this.
What is your average rate of return?
It’s 37% annually over the past 10 years. I calculated this for the last decade just recently. If you compare this to the S&P stock index and its 50 most important companies, it earned 12.5% over the same period. So I think we are doing well even among the best private equity companies in the world. I am glad to boast about this.
How does it look at the moment in Mallorca, where you are spending your holiday?
I guess that there’s about one-third the number of people in comparison to the usual summer. This suits me fine, but the hotel owners probably less so. Many facilities are closed, but, on the other hand, you don’t need to wait in the good restaurants.