Treasure hunting with Young Real Estate Investments yields real estate gems and inflation protection

In a conservative but entrepreneurial manner, Young Real Estate Investments is steadily stringing together a portfolio of sharply purchased gems. The boutique investor works with high net worth individuals. ‘We do not promise golden mountains but guarantee an attractive fixed interest rate on crisis-proof real estate,’ say founder Wim de Jong and managing director Nanne […]

For a company that is barely three years old, The Hague-based Young Real Estate Investments (Young REI) is thriving. The long-term investor has not only managed to acquire seven office buildings, but has already largely transformed them into well-let multi-tenant offices and apartments. Founder Wim de Jong and managing director Nanne Veenstra therefore know how it works in the real estate world. ‘I started fifteen years ago as a real estate investor and developer in The Hague and now participate in all projects myself.’ Nanne now has more than a decade of experience in the industry. ‘Real estate is a local market; we know who’s around and what’s on offer in cities like The Hague, Leiden and Rotterdam. But if great opportunities arise elsewhere, we seize them. Buying low-priced and undervalued real estate and adding value to it quickly is what we have made our own,” says De Jong.

In doing so, Young REI does not operate as a fund manager where excel spreadsheets determine the purchase policy, Veenstra assures. ‘Fund managers tend to calculate potential purchases to death. Of course we do our calculations too, but we have an open mind that allows us to seize opportunities. We have a hands-on mentality, are entrepreneurs pur sang and speak the language of hard-working professionals. We don’t wait for the phone to ring. We bike around town, drive our cars across the country and tap into all public data sources. We regularly have one-on-one conversations with entrepreneurs who themselves had not yet thought about selling their premises or moving to another office.’

Eye for top real estate

That not infrequently leads to fine acquisitions, continues De Jong. ‘Pre-covid we came across a 20,000 m 2 vacant office in Rijswijk. The offices were not old, even looked tiptop but were spot on. The only downside was the location in Plaspoelpolder, an office location with a lot of vacancy that is considered risky. However, we saw an excellent office in a prime location near the highway and struck. Because I have built up a nice team of contractors and architects over the past ten years, we were able to get started quickly. Within three years, we managed to lease 13,500 m 2 of office space and transform 6,500 m 2 into a student hotel.’

Over two years ago, the business partners decided to further professionalize their operations and Young REI saw the light of day. ‘The biggest difference is that we no longer deal with banks but with private bondholders. We target family offices and wealthy individuals who are looking for a safe and stable destination and inflation protection for their capital. They can enter from 100,000 euros per bond with a fixed interest rate of 6 percent per year on new purchases. Bondholders also have the first right of mortgage on the collateral. We ourselves participate about 50 percent in our investments. We make purchases only if there is a high probability of value growth. We take good care of our money and our real estate. In fact, we share the same interest as our bondholders. By the way, bondholders who want to become property owners themselves but lack experience can also come to us. For example, we purchased a property in a joint venture with a private individual, with Young REI taking on the renovation and operation.’

Higher appraisal value

Young REI regularly manages to identify “gems and bargains,” Veenstra explains. ‘These are often buildings that do not live up to their potential. We know how to buy those properties sharply, make them healthy and add value to them. We do that by renovating an empty building and making it more sustainable and finding the right mix of office tenants. We also acquire offices with existing tenants. Then we decorate the building, create spacious office floors and add amenities such as a coffee bar, a cozy lobby and meeting rooms. By doing so, we bind good tenants to us longer and attract new companies.’

Young Real Estate Investments maintains a conservative investment strategy, stressed founder De Jong. ‘We both don’t like taking irresponsible risks. Young REI will always be low-funded. We consciously choose locations where demand remains even in economically bad times and the rental flow remains intact. Thanks to our sharp purchasing policy, we also manage to quickly increase the appraisal value by tens of percent. As a result, there is less and less debt on the balance sheet. Our overhead costs are also low. For example, we do the property management and leasing ourselves with a team led by our Director Asset Management Dave Boer. An additional advantage is that our tenants have direct contact with the owner and we know exactly what is going on and what their wishes are.’

Solid Tenants

Don’t expect slick talk with pretty pictures at De Jong and Veenstra. We don’t promise mountains of gold. We let our real estate speak for us. Like our Hague acquisitions in stately neighborhoods like Bankaplein, Zeestraat and Parkstraat. The Parkstraat building was dark and narrow inside. We opened up the roof for lots of natural light. Downstairs we created 69 turn-key studio apartments; upstairs we created a modern office of 600 m 2. The Zeestraat building is a national monument with its own underground parking facility. We are in the process of turning this into a vibrant multi tenant office for start-ups and young professionals. We also bought a solid office building in Zoetermeer. We are assured of rental income, since it has been leased for many years to solid companies. We will further increase the value with sustainability,” said the managing director.

Aren’t the windfalls gradually running out, now that the best downtown properties have been transformed or redeveloped since the credit crisis? De Jong doesn’t think so. ‘If we hit four a year, we’ll be fine. But I estimate that prices will continue to fall in the near future and more supply will come on the market. Post-covid, there is uncertainty in the office market about the impact of hybrid working. In addition, many office investors are having to refinance their portfolios. With interest rates on commercial real estate loans doubled or even tripled, I expect there to be selling pressure in the coming years. So investors and managers with problem portfolios can call us anytime. Young REI is also in the market for hotels. Veenstra: “We previously renovated two moribund hotels and sold them at a nice profit to a hotel chain and a municipality. There are quite a few private hotel owners who have not overcome the covid dip and are now facing high tax debts. I can imagine older business owners wanting to get rid of this.

New employees

However, according to Veenstra, the focus in the coming period will be on already leased buildings. ‘Until recently, we transformed a lot of real estate. Due to the current stricter rental housing regulations, long permit procedures and high construction costs, this is almost no longer profitable. Therefore, we prefer leased commercial properties with a stable cash flow. After all, we pay our bondholders largely from rental streams.

When we buy empty properties, we do not transform them into housing but office space. The rental housing market is so restricted that there is no longer a market. In commercial real estate, good entrepreneurship still pays off and we can respond to pure market demand with our office strategy.’

De Jong and Veenstra are looking forward to the new partnerships to be formed. ‘At the moment the funds for offices The Hague Zeestraat and Zoetermeer Heliumstraat are still open, for which we are seeking 50 percent financing. The total fund size of Young REI is now 20 million euros. Together with our bondholders, we are going to make Young Real Estate Investments substantially larger. In a responsible, healthy way, that is. We will first sit down with each potential financier. After all, entrusting us with at least a ton is no small thing. We will also expand our close-knit Young REI team. A real estate education is not a requirement. We are looking for financially literate people with an entrepreneurial attitude. It is hard work but the bow is not always bent. A successful purchase or rental is not infrequently followed by a game of table tennis or a visit to a grand café or restaurant. Whoever that appeals to is also welcome for a cup of coffee in our The Hague office,” concludes the founder.

@2024 Young Venture Group