High ROI and ROE, real estate co-branding from my personal experience

It may come as a surprise that the global leaders of high fashion and jewelry, Bernard Arnault and Michael Burke both started in the real estate development business.?

Over the last 15 years the world witnessed collaborations between real estate developers and high fashion brands to build co-branded projects.

Historically co-branding collaborations started between real estate developers and hotel brands, at the time, hotels were building serviced apartments for sale within their hotel complexes. Such projects were featured in major hotel chains like the Four Seasons, Ritz Carlton, Park Hyatt, W and many others.

In the past 17 years in the real estate industry, I came to be one of the biggest proponents of co-branding projects. I introduced numerous brands to their first projects in real estate, such as Elie Saab, Lamborghini, Fendi, Bugatti and Roberto Cavalli; and collaborated with many others, such as, Versace, Missoni and Trump.

Co-branding is simply; high fashion and high luxury lifestyle brands lending their name to a real estate project, and in turn, the creative team of the fashion brand will supervise, design and approve the quality of the project.?Just like buying your Fendi De Jour bag, you can live in a Fendi inspired apartment bearing the logo and the DNA of the brand.

Over the last 10 years we’ve seen collaborations with brands like Fendi, Missoni, Bulgari, Versace, Armani, Cavalli, Elie Saab, Baccarat, Trump, Aston Martin, Lamborghini, Porsche and many more. And as Michael Burke puts it in one of his interviews, ‘real estate was all about building communities and dealing with architects, it’s the same thing as dealing with creative and commercial people’.?

Co-branding in play?

You may have read articles about this topic, but allow me to share my personal experience of co-branded projects. Over the past 16 years, while working with real estate developers Damac, Emaar and Dar Al Arkan. All the projects were based in the GCC but attracted multinational buyers from across the globe.?

Working with Fendi on projects for Dubai and Riyadh,

The team at Fendi started by working on the interior design of both projects, while respecting the culture and vibe of each city. The produced perfect interior designs for the common area and the individual apartments, additionally, tailor-made furniture was designed for the mock up apartments. How were the team at Fendi able to do that? Especially when these were the same people that worked with the late Karl Lagerfeld and Carla Fendi on fur styled coats and high fashion accessories? The team at Fendi could do it because they have successful home interior lines that were able to transcend the home furniture design common areas and residential units. And this is the key feature of a successful co-branded project.?

A high luxury lifestyle brand should possess a foot hold in interiors, because the interior design lines of furniture and home accessories is embedded in the DNA of that brand. The clear recipe of failure in a co-branded project is to work with a brand that has no notion and no presence in designing home furnishings. This is why plastering the name of Michael Schumacher or Chanel on a real estate project does not work.

Working with the Trump Organization,

Politics aside, Donald, Ivanka and Eric Trump created a successful upscale real estate and Golfing franchise. They started with key projects in key locations and maintained high quality designs, finishes and services. They worked hard on building the brand by developing hotels and furnishing franchises to sustain the brand position.

When Damac acquired the land for Damac Hills in 2012, the market in Dubai was still soft, therefore, in order to elevate Damac’s position as a master planner, rather than simply, a company known for building towers, I researched golf franchises. And landed on the Trump Golf franchise, one of the very few in the world that built iconic and luxurious golf courses in the US and Europe. I still remember going to the founder of Damac and convincing him to build a Trump Golf Club in Damac Hills, his first response was ‘do you really want to work with that old guy?’. Well, that old guy’s brand was instrumental in lifting the brand into the master planning and the upscale golf world.?

Working with Elie Saab,

Emaar built a new island overlooking the Palm Jumeirah and the Arabian Gulf, filled with towers with ravishing views and a private beach. It’s like having your own piece of Miami South Beach. At the time, I proposed to Mohamed al Abbar we add a sense of glamour, mystique and sensuality to the island. Naturally, we had a discussion with Elie Saab, and he immediately agreed. Elie Saab got personally involved in the interior design of the common areas and the residential units, at the same time, he was launching the Elie Saab furniture range. As a result, the project was launched through a private fashion show at the Dubai Opera, the project was so successful, people scrambled to get in, the project sold out and another iconic name sat next to the mega Emaar brand.

How do clients, customers and investors benefit from co-branding projects?

All real estate buyers have two main targets, a residence and a return on investment. Sometimes it’s just an investment and sometimes its both. A real estate project should always present a high return on investment over time in terms of appreciation in value and rental returns. Same goes with co-branded projects, the return on investment is always sustained, as these projects are low in supply and they present the limited editions of real estate. These co-branded real estate projects present a potential high return on investment and uniquely high return on EGO, the ROE. This deep desire to being able to own the unique, the one of one, the limited editions, satisfy our egos for ownership. The psychological returns are unfathomable.?

What are the concrete benefits for real estate developers?

Real estate developers benefit from co-branding by uplifting their brands to a highly desirable lifestyle brand, synonymous of luxury and elegance. Attracting high net worth individuals who are loyal clients of lifestyle brands.

On the financial side, the benefits are not high for a particular project as the investment in co-branding is a franchise fee, the upgrading of the projects usually eats up most of the 15 to 20% price premium that co-branded project demands, but then again, the benefits outweigh the disadvantages.

A note of caution for real estate developers

Co-branding does not replace low customer service or low-quality delivery. These big fashion and high-end lifestyle brands, are where they are, because of their spectacular customer service and a high-quality product. Thus, fashion and lifestyle brands won’t be able to propel a real estate brand that does not take care of its customers and its quality standards. These key brands will refuse to work with any developer that is not attentive to customer service and quality as it may damage their reputation.

How do brands like Fendi and Missoni benefit from co-branding?

These brands benefit from heavy marketing schemes and a reach out to clients and in new geographical locations. Additionally, they benefit in fees and furniture sales without taking any financial risks on the project per se.?

From my experience with these brands, they only tend to work with developers who have a reputation for delivery and execution, without any compromise on quality. Therefore, it is imperative that all aspects of the final product are fully controlled and delivered according to the announced marketing material (interiors and exteriors) and the brand guidelines were respected throughout. Another critical element is controlling the management of the project, is the audit. After all, the project is a brand showcase, therefore, insist on annual third-party audits to make sure the quality of the project is maintained, because any audit failure is an immediate announcement that the luxury brand will pull out from the project and developer.?

I look forward to adding more co-branded projects and convincing more brands and clients to get into the glamourous world of co-branded real estate. After all, a Patek Phillipe Nautilus and a Hermes Birkin are just examples of low supply coupled with high demand, bringing both high ROI and ROE, just like real estate, enjoy.