January 3, 2019
Commercial real estate investment is experiencing a boom period. Despite low yields, operators with abundant liquidity continue to favor real estate assets, particularly those considered "core" and "prime." This influx of buyers benefits the market and boosts investment volumes. However, this trend is hampered by limited supply. As a result, prices are appreciating and yields are eroding. In this peak-of-the-cycle context, Mata Capital reveals its convictions, which sometimes run contrary to market consensus.
Highly selective acquisition of small-volume assets
The acquisition strategy is as follows: acquire quality assets of "small" volume (unit value not exceeding €20 million) at a good price, while diversifying holdings to build a substantial portfolio. This policy naturally takes into account objectives for capital security, rental performance, and potential long-term capital gains.
This strategy, a source of diversification due to the large number of assets, requires integrated, structured asset management capable of driving the performance of portfolios under management. This mission is facilitated for retail assets due to tenant autonomy in managing works, low tenant turnover, and a high occupancy rate linked to extremely selective locations. For example, Mata Capital's first fund, MCFHIPF#1, dedicated to out-of-town and local retail properties, comprising over a hundred assets, boasts an occupancy rate of over 98%.
Long-term retail resilience and short-term office value creation
Valued for its strong long-term resilience, retail properties are favored for long-term holding. Unlike office properties, retail assets with locations and tenants that meet consumers' fundamental needs are extremely resilient to macroeconomic cycles. The current "retail bashing" conflates aging shopping centers or malls, as well as brands that haven't embraced digital transformation, with all physical retail, which accounts for 95% of consumption in OECD countries. This misunderstanding of this asset class, coupled with a low presence of institutional investors in this market, presents an opportunity for specialists.
In retail, the focus is therefore on dynamic districts within Paris (Marais, Batignolles, Saint-Germain, etc.) and high-traffic areas in other growing metropolitan areas.
For office properties, assets with value creation potential are prioritized. The idea is to restructure them for short-term sale. In a competitive environment where the risk of overpaying for a deal exists, the strategy is clear: prospect with agility and method in less exposed and less visible markets to unearth "complex" assets sold at a discount.
Once the building is acquired, Mata Capital's team expertise will involve repositioning it to enhance its value in the market. This may involve resolving potential legal, technical, and administrative issues. Other scenarios are possible, such as extensive refurbishment, overhauling current leases, reducing vacancy rates, or revaluing rents. All these interventions are aimed at improving returns and/or enhancing the value of these real estate assets.
Anticipating the next cycle with agility
In this period, which resembles a "market peak" where stabilized assets show high valuations, Mata Capital rebalances and divests some assets from its portfolio to realize capital gains.
At the same time, it has surrounded itself with responsive investor partners who, in the event of a market downturn, will enable it to make opportunistic acquisitions. Thanks to its lean team and streamlined decision-making, Mata Capital prioritizes agility. Having this capability is an asset in a competitive and changing market at the peak of its cycle.