Deutsche Finance International or DFI, is a fast-growing boutique private equity platform based in London. We invest in European real estate and real estate-anchored businesses, transforming our investments through value-add strategies to deliver superior risk-adjusted returns.
We are opportunistic in seeking undervalued assets or businesses with fixable impairments or potential for improvement. Through hands-on asset management and targeted development, DFI and our partners aim to add value to our investments by increasing income, upgrading the user experience and making them more investible for institutional capital.
We believe that the real estate needs of society are evolving rapidly driven by the disruptive forces of social change, demographics and technology. As a result, we view real estate as a customer facing service, not just a product or passive asset. Our platform is designed to capture opportunities within this changing landscape and we take a proactive, end-user oriented approach to our investments. The firm seeks to collaborate with innovative forward thinking occupiers and operators.
We invest in all of the main types of real estate, although our particular specialty is in “alternative” and operationally intensive sectors, where our expertise allows us to optimise investments’ operational performance to improve returns. Examples include student accommodation, private rented residential, hospitality, retirement/assisted living, mixed-use and leisure. We principally target European cities with deep markets and favourable growth prospects. While DFI typically focuses on small and middle-market transaction of €5 million to €50 million in equity value, we will invest in materially larger deals when we have a strong conviction that they present value and opportunity. Our thematic investment strategies are designed for assembling portfolios of scale. We invest in direct asset, corporate and credit situations.
DFI is the investment advisor to DFI funds, related co-investment partners and Deutsche Finance Group’s direct European real estate investment activity. We are responsible for the origination, execution, financing, asset management, operation and disposal of investments. Our platform serves global institutional clients, such as pension funds, insurance companies, financial institutions and family offices. We prefer an active partnership with our clients built on high levels of transparency, frequent communication and robust reporting. We are strongly aligned with our clients since the firm’s Partners co-invest alongside them in a personal capacity.
The large majority of DFI’s transactions are sourced off-market or on a privileged basis, leveraging our extensive global network of operating and local partners, lenders, intermediaries and advisors.
We are a committed, multi-disciplinary team with an entrepreneurial mind-set, who are wedded to a set of core values that shape how we go about reaching our goals. We recognize that our key stakeholders make vital contributions to our business and we develop mutually beneficial relationships.
Our overriding goal is to provide access to differentiated value-add and opportunistic real estate investments that generate superior risk-adjusted returns. We achieve this by following a disciplined and creative investment approach; employing and working with exceptional talent; and driving value creation though active asset management.
Ownership and History
The firm is part of Deutsche Finance Group or DFG, a global investment management firm that specialises in private market real estate and infrastructure investments. Active since 2005, the firm has a reputation for harnessing emerging talent and accessing differentiated investment opportunities. DFG currently oversees more than €1.5bn in AUM and serves a network of c. 1,600 institutional investors. The group is headquartered in Munich and has offices in London, Denver, Zurich and Luxembourg, employing more than 75 people. DFG is privately owned and regulated by the Federal Financial Supervisory Authority of Germany, BaFin.
DFG has built an extensive and successful track record in identifying emerging mangers, supporting them by investing in real estate funds, club arrangements and through co-investments. The firm has been broadening and deepening its offering to keep pace with the demands of its expanding investor base. This led DFG to join forces with former collaborators Frank Roccogrande and Gavin Neilan in 2016 to establish DFI to grow its private equity real estate business and provide clients with access to attractive direct real estate investment opportunities.
DFI is independently managed with its own robust corporate infrastructure and best-in-class team. The firm benefits from the full support of DFG, which includes access to DFG’s origination channels, investor base, global insights and financial resources.
“Whenever you find yourself on the side of the majority, it is time to pause and reflect”
– Mark Twain
Our Investment Approach
DFI aims to deliver consistent and robust returns, with a priority on capital preservation. We target undervalued investments with scope to add value through active asset management and capture asymmetric returns. For every investment we make, we compile a detailed plan to enhance the asset or business, which incorporates an extensive risk/return analysis. Our approach to investment is based on the following core principles:
Price versus Value
We seek to buy assets below their intrinsic value as this provides a dependable foundation for profit generation and manages risk by creating a margin of safety.
Thematic and Insightful
We target real estate markets and sectors that combine attractive growth fundamentals with defensive characteristics. Favour locations with supply-demand imbalances, which benefit from urbanisation trends and infrastructure investment. Search for opportunities in real estate caused by the disruptive forces of technology, social change, demographics, and regulation. We continually assess macro-economic, investment market and occupational market cycles to inform stock selection and buy/sell decisions.
Active Value Creation
During our period of ownership, we seek to drive growth and create value at the asset level through proactive asset management. Examples of how we achieve this include:
- Active leasing and re-leasing
- Refurbishment and Repositioning
- Targeted development and re-development
- Building platforms of scale and assembling portfolios through the acquisition of complementary assets
- Planning enhancements
- Improved property management and expense optimisation
- Place making and re-generation
- Asset restructuring and recapitalization
- Working with management teams to build enterprise value in corporate investments through various activities that include:
- developing strategy and nurturing expansion
- improving governance
- providing investment and working capital
- developing new products
- aligning incentives
- adding capabilities
Selecting Best-in-Class Operating Partners
We often work with local operating partners and asset management teams, who provide specialist market or asset class expertise to optimise the performance of our investments. We carefully identify the right partner for each investment, factoring in the relevant market, asset class and risk profile to ensure we align ourselves with partners with exceptional capabilities, strong local networks and shared values and vision. A core differentiator for the Firm is that we have an enviable track record in identifying and working with emerging talent in the real estate sector, successfully harnessing the drive, business growth and creativity of their platforms for the benefit of our investors
Our focus is typically on small to medium-sized transactions, equating to €5 to €50 million of equity value, a segment in the market where we perceive there to be less competition. Nevertheless, our investment strategy is highly flexible: we can shift to materially larger deal sizes, new asset classes, geographies and themes when we see market dynamics evolve to capture opportunities.
Understanding, recognising and controlling risk is an integral part of decision-making and organisational processes at DFI and seen as critical for successful and defensive investing.
Utilise Appropriate Leverage
We target markets and opportunities where the yields of purchased properties are comfortably higher than the financing costs. This generates a cash on cash income return and reduces the reliance on the residual value of each investment. DFI completes a rigorous sensitivity and scenario analysis to match the appropriate debt structure to the cash flow profile of each asset.
Diversification of Risk
We actively manage portfolio construction for our client accounts and funds to diversify risk across geographies, asset classes, real estate cycles and investment profiles.