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Billionaires hunt for real estate bargains in shadow of pandemic

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Desirable real estate locations for the ultra-rich and family offices include the Balearic Islands in Spain (above) and Manhattan in the United States.

Madrid

DAVID and Simon Reuben are not letting the novel coronavirus pandemic curb their real estate ambitions.

Since the crisis began, the billionaire brothers have made a push into Madrid's residential market, bought almost 90 hectares of land in Spain's Balearic Islands and acquired Manhattan retail property near Rockefeller Center from SL Green Realty Corp for about US$170 million.

Other wealthy investors are exhibiting a similar appetite for real estate.

Almost half the 121 family offices surveyed by UBS Group are looking to increase their allocations to property as they hunt for opportunities and potential bargains, according to the Swiss bank's Global Family Office Report 2020.

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The firms also expect to be more aggressive in putting their cash to work than most other investors.

"Covid-19 has reconfirmed that diversification is the game to be in," Josef Stadler, head of UBS's global family office unit, said in an interview. "Real estate has always been an asset class for diversification, and it obviously has reconfirmed its status."

Slumping property prices in the pandemic's wake have created opportunities for cash-rich investors with long-term outlooks, and few have horizons longer than family offices.

The lightly regulated investment vehicles aim to grow fortunes across generations and have fewer constraints than institutional firms.

Lockdown measures initially froze real estate markets, but many nations are now reopening their economies even as the virus resurfaces in some locales.

With the pandemic introducing uncertainty around long-term demand for office space, the wealthy are increasingly targeting residential property, according to Mr Stadler.

"It's quite an elegant conduit for one generation to hand over the money to the next," he said. "It's the ultimate wealth preservation class."

Many of the world's rich, from Zara founder Amancio Ortega to billionaire banker Joseph Safra, have long favoured real estate, an asset that offers stable cash flows, tax breaks and leverage opportunities.

Private investors including family offices made up about a third of real estate investments worldwide last year, according to real estate broker Knight Frank.

David and Simon Reuben, who did not respond to requests for comment through a spokesman, built a fortune trading metals and later invested in real estate, leisure interests and technology companies.

As part of one property deal completed during the pandemic, they plan to build 650 homes and a hotel in an exclusive neighbourhood an hour from Spain's capital.

Potentially reshaping their fortune further, they are also involved in a takeover of English Premier League football club Newcastle United.

"The pandemic has been hard on many investors," said Harco van den Oever, the founder and chief executive officer of London-based art fintech firm Overstone.

"Ultra-high-net-worth individuals who have not spread their exposure across different asset classes may now be learning about the importance of diversification the hard way," he added. BLOOMBERG

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