Winter in the Sun

The first time this reporter interviewed him was in 2006. He had left US private equity firm Cerberus Capital Management after leading several billions of euros worth of real estate transactions mainly in the German residential sector. Next, he set up a company called Corestate Capital from his base in Zug, Switzerland, which has since grown to become one of the largest real estate investment managers in Europe with €26 bn of AUM. Winter is still the largest individual shareholder at the company that went public on the Frankfurt stock exchange on 4 October, 2016.

But 13 years after founding Corestate, he now lives in Miami, Florida, from where he controls the investment activities of his family office, W5 Group. W5 made headlines in October when it announced the expansion of its ‘Innovative Living’ portfolio with the injection of $500 mln (€452 mln) in capital and the subsequent investment of more than 500 beds in Washington, DC.

US and Asian Expansion

Winter’s entrepreneurial bug has clearly not gone away. In Europe, with Corestate, he was an early mover into student housing. Over in the US he has spent months and months researching the market. The result is W5 is deeply interested in Innovative Living concepts including micro-living, co-living and next-generation hospitality.

Last year, W5 Group said in September that it bought a majority interest in The Highline at Union Market, a 315,000 sq ft (29,000 m2), mixed-use project in Washington, DC, where one-third of the residential units will be co-living apartments.
It soon emerges from conversation that Winter is not only targeting US gateway cities. His aspirations are limitless. He wants to build a portfolio in Asia where he spent time recently, as well as in Europe.

The German-born entrepreneur is no stranger to international markets, which gives him confidence to execute. In Mexico, W5 took a 50% share in a 32-hectare development called Lagunas de Mayakoba with 1,864 villas and condos. W5 sold the stake in June 2016 at a time when sales revenues were projected to be $320 mln. Located in the Mexican Caribbean, the development is finished now with villas for sale starting from $2.9 mln.

Winter is thriving in the sun. ‘There is not much to complain about,’ he jokes. ‘They have the two parts here – one is the beach part and the other is downtown. There are a lot of people coming here from Europe, liking the different lifestyle and weather. Plus, the economics are great. Downtown Miami is booming. There is a lot of growth here.’

Winter and members of his family lived in Switzerland for a total of 11 years. Towards the end, he was spending October to March in Florida. For three years, he and his family divided their time like this before opting for a permanent move. Winter’s children go to school in Miami – though his eldest is actually in London, having just graduated from university.

Winter has kept his W5 office in Switzerland and also maintains an office in New York where W5’s head of real estate is located.

Favourable Climate

Not only is the weather good in Miami compared to New York but also the tax climate. However, for Winter – who once worked in New York early in his career – the Big Apple is where most of the big investment firms reside along with the talent pool, hence W5’s office in Manhattan.

Turning to W5 and the opportunities for co-living, he says: ‘I have had time to look in detail at real estate here in the US and how it compares with Europe.’ Besides all the different concepts, there are also the nuances of financing structures – in a word the US market is ‘challenging’, he notes.

But the Corestate founder hasn’t been fazed. ‘When I came here, I was looking for some niche concept. I was pretty active in the past in student living. Student accommodation has revolutionised the student letting market over the past 15 years. Then I looked at co-living and felt this had the potential to deliver the same impact as student accommodation.’

‘I felt this is an asset class that is not exactly unknown because of the information about it. But I looked into it deeply and I feel that what happened with student accommodation over 15 years will happen with co-living in a much shorter timescale.
‘Even those that make good money in New York, for example, struggle to buy a one-bed or studio apartment in Manhattan. The average studio in Manhattan is $3,300 per month. A lot of people are sharing apartments to share costs. It is a big problem not only in the US but also in Europe as well as in Asia.’

Extensive Field Research

Winter assessed where he felt he could make outsized returns but minimise risks of residential property. His pillars are affordability, community, flexibility, design and technology. Affordability, he explains, involves smaller properties, micro-living and location. In terms of the community aspect, he says he finds the whole issue very interesting. As part of his research, Winter went into many apartment buildings, including both luxury and affordable. But he observed people simply do not know their neighbours.

‘The loneliness factor of a 25-year-old today is three times higher than for a 65-year-old. The key in this world of digital connectivity is physical community. This what co-living operators do. They have community managers on the ground and there are the shared living spaces. They can sit together with their roommate that they were matched together with via a technology approach and share some moments. If they want to, they can use the bigger facilities in the building that are fully programmed.’
A young workforce much more inclined to travel and be mobile means there is demand for people to swap say, Berlin for Los Angeles or San Francisco and always have the same programmed building. ‘They are like members of a club. They are also customers or consumers. In the old days, we never thought about it like that. It was just about maximising rent.’

Today’s dynamic lifestyles also means leases have to be flexible and short-term. ‘The contemporary lifestyle involves changing jobs more frequently, a sort of nomad living,’ says Winter. ‘Co-living properties come fully furnished, so one only needs a bag or a case and start living there right away.’

Personal Stamp

Design-wise, Winter has viewed umpteen nicely furnished properties. But he believes a cosy design is more in tune with community living than many properties he has seen. On the technology front, there are numerous apps and software programmes to enhance the co-living experience, including roommate matching.

Taking all these elements from his research, Winter knew how he wanted to put his personal property portfolio together. The Highline in Washington, DC, is located in the up-and-coming Union Market neighbourhood. This pioneering building is the first in DC to offer residents the flexibility to choose between co-living and private rental accommodation while enjoying the benefits of a ‘cohesive’ living community.

All residents will enjoy state-of-the-art amenities at this project such as a high-end fitness centre, co-working lounge, expansive rooftop, and an infinity pool overlooking the Capitol building. The property will feature high-end design and art selections, and curated weekly events for residents. Meanwhile, with its diverse selection of food and retail spaces, the surrounding neighbourhood exemplifies the tenants’ desire for a true 24/7, live-work-play environment, W5 believes.

But this vision is not restricted to the US, as previously stated. ‘This is a global play,’ says Winter. ‘One billion more people will live in the big cities by 2030. More than 60% of the total global population will be living within an urban area.’ This is why he believes there will ultimately be a lot of players entering the innovative living space. ‘It will be all over. While innovative living may currently be an emerging trend, we believe it will quickly develop into a mature asset class. We are happy to be seen as first mover, and plan to build up a multi-billion portfolio starting in the US and Europe expanding into Asia.’