The new address on Matthew Scholl's business card is 1330 Avenue of the Americas and it couldn't be more apt. Scholl is the Head of Investment Management Americas at Union Investment Real Estate GmbH. As head of the US Representative Office, he and his team recently moved into a larger office in midtown Manhattan between 53rd and 54th Street. But the new address doesn’t just suit Scholl’s job description, it also represents his entire team.
When the experienced transaction expert joined Union Investment in February 2016, he took over the challenging task of growing the real estate portfolio in the Americas. Since then the company has hired three additional employees in New York and invested more than 2.2 billion euros in the USA and Mexico under Scholl's direction, who holds a degree in economics and an MBA. “With six employees and a property portfolio well in excess of 5 billion euros, we’re big enough now for our own office,” says the American. The timing for the move within Manhattan was perfect, because the shared office agreement with DZ Bank, a co-operative banking institution, dating back to 2003, was expiring. Now we have enough room and are all together in one interactive, modern environment – that’s great for our team spirit.”
Focus on USA, Canada and Mexico
The investment team is primarily responsible for the office and industrial sectors and collaborates closely with a partner in the US on transactions. Scholl gave it a regional focus right from the start. The target markets currently include the USA, Canada and Mexico. To respond to the cultural differences in the various investment regions, Scholl promotes diversity. For example, real estate expert Nicholas Friedmann was born in Latin America and uses his native Spanish in the New York office. “Mexico is a comparatively opaque market. Real estate deals there are always about networks. That’s why it’s so important that we have someone on our team who speaks Spanish. It gives us increased visibility and credibility on the ground in Latin America,” explains Scholl. The investment team also includes Tal Peri, born in Israel and raised in Düsseldorf, and Willis Kim, a Korean-American. Willis Kim previously worked in Tokyo and then for Union Investment in Singapore for a few years before switching to the Americas team in New York three years ago. Kseniya Merritt, a colleague in the New York office who was born in Russia, recently started covering the retail segment in the region, which like the hotel segment, is managed centrally by investment colleagues in Germany. “We have a very close and uncomplicated relationship with Hamburg,” says Scholl. “So of course, it helps that some of us speak German in addition to English, as well as other languages.” That goes without saying for his assistant, Martina Laque, who comes from the German town of Neustadt an der Weinstraße.
Scholl also has roots in Germany – although it was a very long time ago. His ancestors emigrated to America before the American Revolution. For Scholl, who was born in Atlanta, Georgia, that was a good reason to spend a year in Germany as an exchange student. “I lived with a family near Dortmund when I was 15. I could hardly speak a word of German at first, but I learned to speak the language quite well in the one year I spent there attending a German high school.” After graduating from university, Scholl spent nearly ten years in Germany working in Munich and gaining extensive experience as a portfolio manager with a global real estate investment fund. He therefore considers himself a Europeanised American and says: “Americans could often benefit from working for a German company.” Germans can be very direct, which is helpful in business situations; in contrast, Americans often speak in nuances which can prove challenging for Germans to interpret. By carefully navigating and showing sensitivity for these sorts of cultural differences, Scholl proved successful in examining the growth markets in America for Union Investment’s open-ended real estate funds. “Our strategy is to expand our footprint in this region. We used to almost exclusively concentrate on the gateway markets such as Washington, New York, San Francisco, Chicago, and Los Angeles. In recent years, however, we have seen that the strongest growth markets are in our secondary cities, like the Sun Belt markets, for example, a group of warmer states stretching across the southern US.” Scholl also says that many of these secondary cities can be found in the so-called “smile markets,” because you can draw a smile on the US map, stretching from Boston along the East Coast through Atlanta, Dallas, Phoenix, and then back up the West Coast.
Matthew Scholl studied economics at Hampden-Sydney College in Virginia, USA and earned his MBA at Georgetown University in Washington D. C. He worked at TMW Real Estate in Atlanta (2001–2002), before joining Prudential Real Estate Investors in Munich (2003–2012). He then took a position with Swiss firm AFIAA, the Foundation for International Real Estate Investments, in New York (2012–2016). He joined Union Investment Real Estate GmbH as the Executive Director and Head of Investment Management Americas on 1 February 2016. Scholl, an American, heads up the US Representative Office in New York.
“With a few exceptions, we have focused our acquisition strategy specifically on these markets.” In Dallas, Texas, for example, the timing was extremely beneficial for purchasing the class A office building at 2000 McKinney Avenue in the Uptown district: “At first we had to do some lobbying internally to persuade our German colleagues to enter this market, but the 2016 Dallas deal has proven itself as a major success. We’ve benefitted from enormous rental growth in this dynamic Texas market,” says Scholl. His team is currently focused on around 20 markets in the US, and the portfolio has grown quickly. Scholl could envisage procuring more office properties in a few cities like Boston or Seattle. “We’re looking all across the USA to spot and source viable opportunities,” says Scholl. “But we absolutely want to strengthen our portfolio in the Sun Belt because the economic conditions are extremely strong there.”
Union Investment is inclined toward big deals in the office sector with properties in excess of 150 million euros. For that reason, his team deals primarily with major US-based funds and institutional investors on the seller side. And these professional players get right down to business, explains Scholl: “The US is the largest and most transparent property market in the world. Sellers here want to have security and conclude a deal quickly. That’s accelerated even more in recent years. Sometimes a transaction can take just three or four weeks.” Union Investment has successfully positioned itself as a reliable and efficient partner in the US market. To ensure that the deal stays on track, the investment team relies on its long-term partnership with Metzler Real Estate headquartered in Atlanta and Seattle. The subsidiary of the German Metzler Bank specialises in North American real estate markets and offers Union Investment independent advice and investment services on site. "We use Metzler’s external manpower and support," confirms Scholl. "Our colleagues there are also vital for handling the transactions. It’s important that we have a robust team here," he adds.
Long-term growth strategy
Union Investment currently holds 25 properties in the US with an appraised value of more than 4.5 billion euros. However, it could become more difficult to maintain this level of growth at the same speed. “The timing is not as optimal for acquisitions as in recent years,” says the investment manager, citing increased hedging costs as the reason. As a euro-denominated investor, Union Investment is hedging its currency transactions. According to Scholl, rising interest rates in the US have significantly increased the company’s costs, which could result in somewhat smaller investments than planned in the short term. Positive changes in the tax situation at the start of 2018 could nevertheless support its growth plans.
Scholl currently wants to bide his time in Mexico City as well, which he considers another interesting growth market. Exactly when the portfolio, which currently holds seven office properties valued at around €360 million, can be expanded is also a question of timing, but Scholl expressed a strong desire to “acquire more properties in Mexico City over the medium to long term.” In contrast to Mexico’s market, where the company is only targeting Mexico City, Union Investment has three target markets in its sights in Canada: Vancouver, Toronto and Montreal. “In Canada we’re interested in the three major top-tier cities, but these markets are quite expensive and dominated largely by domestic players. It’s been a real challenge to gain a foothold in Canada again after our exit in 2013,” says Scholl. Since Canadians often negotiate with domestic players, the company needs to find a local partner for a successful re-entry investment strategy. “That’s our goal for the short to medium term,” confirms Scholl.
Coworking is here to stay
The well-connected investment manager is watching the growing importance of coworking in international office markets. “Unlike two or three years ago, we now consider WeWork a very interesting tenant, for example,” explains Scholl. WeWork has leased around 30 percent of the rentable area in the Triangle Building in Denver, Colorado. “Coworking is trendy, and just by virtue of having these tenants in your building, you can attract other tenants as well. Tenants want to score points with millennials, especially in terms of tech,” notes Scholl. Coworking has now become an established model even with major companies, which pay exorbitant rents in some cases for this kind of space requirement. Scholl does not believe that coworking will completely overrun the traditional office market. The real estate expert views the new potential trade sanctions with concern. Developers could be impacted by rising costs in construction materials and the industrial sector could feel the effects through declining trade volumes. Nonetheless, Scholl does not expect foreign real estate investors to withdraw from the US market. “When you have a global portfolio, you have to have a presence in the American real estate market.”
The city dweller loves the mountains
As an American with a global worldview, Scholl feels very comfortable at Union Investment. “I move between two worlds at work,” he says, “and I also like the real estate industry because it’s people's business.” It’s a good thing Scholl, who lives in Manhattan, is a morning person and wide awake at 5 a.m., as he can talk to his colleagues in Germany during their work day. He likes to go jogging in Central Park before his work day begins at 6:30 a.m. – unless he is on one of his frequent business trips. He especially values the good internal infrastructure at his employer. “My colleagues at Union Investment bring an enormous amount of expertise and professionalism to the table.” He thinks of his team in New York a bit like a family, “because we work long hours together a lot, we’ve built up a strong sense of trust in the US Representative Office – and that’s extremely important to me.” And what does Matthew Scholl do when he wants to switch off once in a while? “I like to be in the mountains, go hiking; I enjoy the contrast between Manhattan and the beautiful mountain landscape in Austria,” says the self-professed urbanite.
By Elke Hildebrandt (author) and Stefan Falke (photography)