Homburg Invest

Richard Stolle, president and COO of Homburg Invest, explains to Gay Sutton how anticipating growth markets has enabled the company to build a strong and wide portfolio that provides security in the current difficult timesThink property now and you think of falling prices and increasing losses. But for Homburg Invest, a thriving property investment, development and management company based in Halifax, Nova Scotia, a shrewd eye for rapidly expanding markets, a focus on quality and impeccable timing are helping the company to weather the storm.Formed just eight years ago by Richard Homburg, a Dutch businessman who came to Canada in the 1970s and stayed to build the Homburg empire, the company has acquired a wide portfolio of office, residential, retail and industrial properties across Canada, the US, the Netherlands, Germany and the Baltic States, which totals around $4 billion (Canadian) in assets and $1 billion in equity. ÔÇ£As with stock or bond portfolios,ÔÇØ explains Richard Stolle, Homburg InvestÔÇÖs president and COO, who is also Dutch, ÔÇ£our strategy is to spread our risk and have a presence in as many different sectors and categories as possible. This gives us the comfort and sustainability to further develop and let the company grow, and also to ensure that the investors in our fund are secured for the future.ÔÇØThe spectrum of interests is indeed diverse. While the company has a stable portfolio of sale and lease-back properties in all the countries in which it operates and is acquiring a bank of land that will be developed later, perhaps the most vigorous and entrepreneurial aspect of the company is its property development in the provinces of Alberta and Quebec. In both of these regions it has identified strong growth potentials and is ahead of the game in fulfilling that need. ÔÇ£We targeted the province of Alberta in particular because we believe the oil industry in that area will continue to grow and stimulate further development in the area,ÔÇØ Stolle says. ÔÇ£We expect Calgary, for example, to double in size in the coming years.ÔÇØThe interests in Alberta include a combination of condo projects and residential units in Calgary, Edmonton and Grande Prairie. Office sites are going up in Calgary and Edmonton, and Stolle believes there is further huge potential in this sector, and there is also a fair share of industrial sites. ÔÇ£And we were there at the right time.ÔÇØ┬á Montr├®al has also been identified as a big opportunity. ÔÇ£The rental levels are pretty low there compared to other big cities in Canada,ÔÇØ Stolle says. ÔÇ£We feel that Montr├®al has lagged behind in recent years.ÔÇØ In response to this, Homburg Invest acquired over a $1 billion of assets and development potential in and around the city, and it is very excited about one development in particular. ÔÇ£The Viger site is pretty close to the old French Quarter in the old city of Montr├®al,ÔÇØ he says. ÔÇ£There is a beautiful old hotel that will be developed, and weÔÇÖre aiming to create a combination of hotel, retail and residential with parking underground, and all of this close to Old Montr├®al.ÔÇØ The total volume of this development will come to about $350 million. The development sector has been hit by a double whammy in the last year or so. The credit crunch has resulted in a dramatic slump in the price of property, and the cost of building materials has been shooting through the roof. Homburg Invest has not been immune to these problems, but it has developed strategies to enable it to cope. ÔÇ£We aim at the middle to top end of the condo market and always deliver at the top end,ÔÇØ Stolle says. ÔÇ£Take Calgary, for example, where there is a slowdown. Prices have been falling, but we have been able to increase our prices by around 10 percent, based on the fact that we always deliver and based on our reputation for quality.ÔÇØ Homburg Invest also buys materials in bulk at the beginning of a project and pays the invoices as they are received. This ensures that it can purchase materials at the best price, can continue building from a guaranteed stock of materials, and can negotiate discounts by building up long-term relationships with suppliers. So far, the margins it reserves for price increases have been sufficient to cover the huge rises of the last year, and the company ensures it has the equity available to complete its projects and maintain its reputation.Homburg Invest has its eyes on becoming a truly global property company. Expansion into Europe came in 2005 and 2006, at a time when interest rates were extremely low. ÔÇ£We were able to attract financing at levels of 3.5 to 4 percent,ÔÇØ Stolle explains. ÔÇ£We also arrived there ahead of the boom in the market, which topped out in 2007, and we were able to acquire about $1.5 billion in assets.ÔÇØInflation is now on the rise in Europe, though, but again, Stolle believes the company arrived at the right place at the right time. ÔÇ£All the lease contracts in Europe are inflation-linked. So if you have locked in your financing for 10 years at a fixed rate of say 4 to 4.5 percentÔÇöwhich we do normallyÔÇöthe rent is also inflation-linked. ItÔÇÖs an easy game then.ÔÇØFocusing further afield, Homburg is currently looking at possible expansion into Abu Dhabi in the Middle East, and at Hong Kong as a base to reach out into China, and it is searching for the right partnerships to make it work. Wherever it operates around the world, though, its offices are manned by local people employed by the company. ÔÇ£We will only go where we have local management, and our whole portfolio is managed by our own people. There are no third parties involved,ÔÇØ says Stolle. Homburg InvestÔÇÖs next ambition is to open what it calls Homburg University, to encourage its staff members to earn a degree in subjects pertinent to their work. ÔÇ£We have very good contacts in Halifax with St. MaryÔÇÖs, and University of Prince Edward Island, where we have some lovely properties,ÔÇØ says Stolle. But this is all part of the companyÔÇÖs long-term plan to double in size over the next few years, when it hopes to link up with universities in Europe.┬á