Opportunities amid uncertainty: Portfolios operated by Le Bijou franchisees
Investing in real estate on your own is not as easy as buying stocks on a share trading platform. Further, uncertain times require extra attention and, unless you have the analytical brain and time discipline of Warren Buffett, your investments will suffer. It is easier and more advantageous to leave real estate investment to an expert. Le Bijou offers two well-diversified portfolios, one focused on Zurich and the other on Lucerne.
Rather than trying to find, buy, and manage a property on their own, investors can leverage the expertise of Le Bijou. Its franchises are independently operated and managed by Le Bijou.
Investors also enjoy the diversification benefits of investing in a portfolio of properties in a distinct city. Such scale and diversification are nearly impossible to achieve on your own unless you have CHF 30 million to invest. Further, the portfolios only include fully operational properties, so investors bear no risk of failed development.
Franchising benefits your portfolio in several ways:
1) Recession resistance
Le Bijou’s franchise model also includes a strong service-based income stream. Le Bijou provides customizable services to tenants, such as access to 24/7 healthcare, curated meals, personal office services, and cleaning. Such service-based income streams tend to be resistant to the effects of economic slowdowns. The pandemic is a case in point; while Le Bijou saw a decline in turnover, it was able to generate some extra income by providing in-room testing, doctor visits, and other health services to its tenants.
2) Low market correlation
While every business is subject to the overall economic climate, real estate franchising tends to have a lower level of correlation to the public markets. Individual investors and investment fund managers who had invested in a basket of lodging franchise firms over the 1990-2008 period were able to achieve superior returns amidst low correlation with major stock market indexes, such as the S&P 500 (0.267), CRSP (0.350), and Russell 2000 (0.337).
This is because of the importance of local market conditions and conditions specific to the real estate and lodging market in general, and to the management of franchises. So when you use franchising to balance your portfolio, you can reduce the total portfolio risk and volatility. For example, if the bear stock market deepens because of new geopolitical events, your portfolio will not move all the way with it. This is particularly attractive for risk-averse investors.
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