… the way forward in a climate of change
Constrictions often lead to the most innovative of ideas, just as being offered a limited amount of Lego bricks automatically entices one to be inventive. In a climate of financial instability, environmental stress, failing states and ever-scarce natural resources, many nations – and, indeed, many individual companies – have been forced to reassess their strategies and search for new and innovative responses to the vicissitudes of the past few years.
In the aftermath of recent global calamities, we have become painfully aware of our essential interconnectedness.
As implied in the theme of this year’s World Economic Forum Annual Meeting in Davos, the next step forward will involve finding creative and sustainable solutions to safeguard recovery and implement change for a more stable and predictable world, albeit with a limited set of building bricks. The Forum’s main objective – Shared Norms for the New Reality – reflects the necessity of finding a way forward – but together.
An idea that works
The chairman and co-founder of the leading international luxury property investment fund, The Hideaways Club, Mike Balfour is a prime example of how thinking around the problem, even grasping it as an opportunity, can lead to success. Inspired indirectly by the collapse of the property market that left many investors stuck with real estate all over the world (which had fallen in value and which they were unable to sell), Balfour came up with an ingenious new business idea.
According to Balfour, “The acquisition of property overseas ties up a lot of capital and more often than not brings with it a lot of hassle.” His vision was an international luxury property investment fund that focuses on value creation through professional buying and management of holiday homes all over the world. By buying a share in the fund, investors automatically become a member of the Hideaways Club itself and this in turn grants them the usage of these properties without the inconvenience and risk involved in owning a property overseas.
Based on the concept of shared ownership and asset sharing, the Club was launched in 2007 by Balfour and co-founders Stephen Wise (a former Bain & Co. consultant and entrepreneur) and Helmut Schön (a former corporate financier with Merrill Lynch and UBS). Shared ownership has become a financially astute way to have all the benefits but none of the hassles or total cost of an expensive but not that often used asset. NetJets, the world’s leading shared jet ownership company owned by Warren Buffet, follows a similar model, but jets decline every year in value.
“It’s essential to realize that if it’s an asset you’re only using infrequently,” Balfour explains, “it makes much more sense and is more financially astute to share that asset rather than owning it outright.” Offering members a share in a diversified property portfolio, combined with access to a wide variety of luxury villas worldwide for a fraction of the price of acquiring one such property overseas, is the goal of his current prestigious business venture. A venture which is original in that it combines business with lifestyle.
This is also the reason that despite various competitors, Balfour believes the enterprise has a first-mover advantage: “There are other clubs around but the unique thing about The Hideaways Club is that it is an equity-based fund with members owning 100% of the property portfolio.”
Emerging markets and future growth
Balfour’s apparent astute antenna for trends and focus on an ever-changing market landscape has helped him create a product which seems to have hit a nerve, as well as having great potential for growth not only in Europe and America but especially in countries whose inhabitants have traditionally been unaccustomed to purchasing second or third domiciles, such as China and Asia in general.
The property market tends to reflect the multistate recovery and, while the market in both Europe and the US is very flat momentarily, properties are still on the rise in the emerging markets and in Asia in particular, the market is very buoyant.
The Hideaways Club offers investors in Asia, who haven’t previously had the opportunity of acquiring multiple properties in the past, a solution; a first step, so to speak, in that direction. Asian membership in the Club is in fact growing, as is the Indian market.
Exclusivity and innovation
Club membership is capped at 600 with 100 properties, ensuring exclusivity. A diversified portfolio is offered in a broad selection of markets and currently there are 200 members worldwide, 20 based in Asia – and growing rapidly.
Entrepreneurial creativity often means enlarging the pond you fish in, looking beyond boundaries and existing markets to the investors’ real needs. As Balfour sees it, “What this crisis has done is reduce the money supply around the world. It has made people feel not as wealthy and so they want to be more careful with their money and want to make their money go further.” His proposal juxtaposes a value system based on possessions.
Perhaps sharing is the new “ownership”, the way forward in a world faced with economical and ecological restrictions, in a climate of change such as our own. Seneca would most likely aptly add, “What difference does it make how much you have? What you do not have amounts to much more.”
Innovation and creativity are undoubtedly key factors of getting out of any crisis. “Entrepreneurs have to be innovative in the present economic situation,” Balfour contends, and he is adamant that the people leading recovery will do so only “by finding good ideas which match today’s economy”.
Taking the next step together
The World Economic Forum is a platform which acts as a catalyst. However, looking forward with a sense of confidence will largely rely upon us (ie you, me and everyone else) embracing our common future on the planet and finding creative solutions. While we witness family values deteriorate at a horrendously rapid rate and experience social structures in a state of corrosion, maybe we as individuals, families and businesses, governments, countries and nations finally need to recognize our interconnectedness as a good thing.
Perhaps we need to become aware that we are an integral part of a larger “world family” – living in a global society committed not only to shaping a common and better future but also one that welcomes the responsibility to learn to care for our shared worlds’ resources.
Proactive and innovative businesses such as the one discussed in this article seem like an appropriate response to the conundrum of our day – a response, a next step we take together.
Article by Frances Vetter