Interview with KENSINGTON CEO Mehrdad Bonakdar
Markus Hotz (On Location Lifestyle Magazine) spoke with Mehrdad Bonakdar, founder of the KENSINGTON Group, about opportunities despite fear in times of crisis and the prospects of the real estate market.
Mr. Bonakdar, as founder of the KENSINGTON Group and franchisor, you are the “head” of a brand. How do you personally deal with the current situation and what are your recommendations for your franchise partners and their teams?
I spend a lot of time on the phone, especially with our franchisees and their employees, but also with many customers and business partners. In such a situation, I recommend every leader to take a bird’s eye view in order to make the right decisions. But the most important thing is to dedicate our thoughts to the many victims and the sick in the hospitals and be grateful every day for the fact that we can breathe natural oxygen and realise that things are probably not as self-evident as we all believe. It’s a good time to reflect.
What can one do in such a situation? Business has mostly quietened down?
Yes, however, this will not be a permanent situation, the first changes are already in process.
And what, for example, does a real estate agent do during this time?
They should do what they’re always expected to do: Maintain daily contact with customers. As a service provider and consultant you have to find out who can and wants to invest right now. One can also use this quieter time to develop further. Reading and exchanging ideas with colleagues, competitors and other industries. You can get a lot of input and prepare yourself for what is coming.
Mehrdad Bonakdar · CEO of the KENSINGTON Finest Properties International AG
Existential fears are omnipresent. How do you encourage yourself and others right now?
Everyone has fears. Some more, some less. In good times, it is therefore important to acquire not only a financial cushion, but more importantly a mental cushion and physical fitness. It is well known that people make the biggest mistakes during good times, not bad ones! So I’m currently observing that some entrepreneurs did a lot of things wrong even before this time, were resistant to advice and are now blaming everything on the current situation. That is too easy! We are encouraging each other in the KENSINGTON community at the present time: Together, we are stronger!
What can a real estate agent, who has ongoing costs and has lost income for a few months, actively do?
First of all, every real estate agent should ask themself whether their business model is set up in a sensible way, if after some – especially in the last very successful – years as an agent, they cannot even survive 3-6 months due to the current lack of income. They should draw the right conclusions from this now, show humility, do better in the future and draw positive energy from it. And for this short period of time, solutions must be found. From a mental wellbeing perspective, we at KENSINGTON have hired a psychotherapist with a doctorate who coaches our international team via video conference and advises them in one-on-one conversations. We have also hired real estate and communication trainers who advise our team via webinars.
Do you have cases at KENSINGTON where a franchisee should be worried about liquidity shortages?
Not yet and they are not expected to come. We are in in close and continual contact with all our franchisees, including some of their employees. It’s all about listening. What fears are there. I am very proud of how confidently everyone, really everyone, is dealing with the situation. The franchisees are setting a good example, staying calm, not reducing their marketing activities unnecessarily and doing business as usual as well as possible. For example, at the end of the week before last, 50,000 emails were sent out to customers in Berlin. That is phenomenal. That’s exactly the right way to go. We are all responsible, because there is a “tomorrow”. Never before has the added value of being part of a strong brand been as noticeable as it is today.
That sounds very optimistic…
Of course! I experience it every day: Our M&A sector sold a construction company in Zurich to a young entrepreneur the week before last. Surely one would have to assume that such a buyer would be stepping back at the moment?!
Shortly before the lockdown our Commercial Properties division brokered a portfolio of 38 apartments and 84 parking spaces in Switzerland to a Swiss investor. Here too, the buyer could have withdrawn. Despite everything, option contracts were concluded on Mallorca.
These examples impressively demonstrate the belief in real estate, especially in these times. Real estate was, is and remains one of the safest investments of all. When I see how many viewing appointments at KENSINGTON are currently on hold until they can be made in person again, I’m not worried about the real estate industry. With the KENSINGTON Family Office we continue to search for building plots on Mallorca and Ibiza together with co-investors. For this purpose we have recently even founded a project development company on Mallorca. We will also soon be involved in a new building project in Germany. This all shows very clearly how we at KENSINGTON will approach the future, at least for real estate. I am always optimistic.
How will the whole thing affect the real estate industry?
One thing will never change: Supply and demand determines the price. Always and everywhere. There will also, as always, be a difference between first and second home markets.
And why is that?
A second or third home is a luxury need. It is similar with yachts or other luxury goods. As soon as times get rough, one initially does without it. The focus is on other things. Concerning the primary residence or the investment property, there are of course different buying behaviours, different motives and parameters behind it, such as demand from tenants, interest rate level, shortage of living space, and much more. In markets such as Germany or Switzerland e.g., the long cycle had gradually come to an end, even without Corona. A recession is now unavoidable. Unemployment and insolvencies are also affecting the real estate market. This in turn will effect in rental and purchase prices. But I personally believe that Countries like Germany and also Switzerland will recover faster than other countries. And from 2021, prices will recover again. So-called hotspots will not be so much affected.
And the second home markets?
The same applies here: hotspots remain hotspots.
There are second home markets that have remained very stable even during the other crisis situations, in the Balearic Islands above all, where we are represented across 12 offices. Here, many investors have continued to invest, especially because of the slump in other asset classes in the past, because they have followed the performance of the last 10-15 years and know that they can rely on the markets in Mallorca and Ibiza. Although I don’t like to make forecasts: the Balearic property market will benefit from these events in the future. Buyers will certainly be cautious at first, but there will not be a price collapse, as some prospective buyers might have hoped. The past has shown that the owners, most of whom are very wealthy themselves, are simply waiting it out, which is why there has never been a price slump here. However, the current year will be extremely hard for everyone, especially because nobody knows when buyers will be able to travel back in.
Regardless of the current situation, what are KENSINGTON’s plans for the further expansion?
We got off to a phenomenal start earlier this year with the Mergers & Acquisitions section and KENSINGTON Art, our art platform, has recently gone online, by the way, an insider tip for investors looking for the right approach in current times as investment opportunity.
I’m also looking forward to when things start up again on Mallorca and we can develop the next projects. In the last 2 weeks two new franchise licenses were awarded in Germany and at the beginning of March the master license for Switzerland. Our very promising talks for further master licenses in Europe are continuing. This week we even received a franchise request from California from a longtime customer who moved to the USA 5 years ago. So there is a lot of movement in our company. Despite everything. We are optimistic.
Then I wish you continued success and to stay healthy.
Thank you very much. I wish you the same.