Discover the Jacobson Brothers’ Background
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Jean-Marc Jacobson and Remy Jacobson founded RealT at the beginning of 2019.
Jean-Marc started his career in real estate in 1993 and Remy joined him in 2000.
They have a particular vision of real estate and have developed specific processes that have been tested over time.
Early on, they were inspired by fortunes that were created through real estate. They analyzed the key factors that brought about this success. They regularly quote Rockefeller, Donald Trump and Tony Goldman. The common point of these three investors is that they have concentrated 80% of their real estate in a certain area:
- Rockefeller focused on North Carolina to New York.
- Donald Trump focused on New York.
- Tony Goldman is known for the development of Soho in the 1970s and the Wynwood neighborhood in the early 2010s in Miami.
Realizing that they could model these successes, Jean-Marc and Remy set about to build a real estate empire in Montreal. In 15 years, they have gone from 0 to 18,000 units in Montreal. Imagine what 18,000 units represents, it’s like owning and managing a village within a city!
One can legitimately ask why they decided to concentrate all their efforts in the city of Montreal. At the end of the 90’s, because of the political uncertainties, everyone was leaving Montreal and was afraid of the future. Jean-Marc and Remy took a chance and began specializing in places that were in decline, where no one else wanted to invest. It paid off in spades.
I – Vision
Ever since, their credo has been: Buy when real estate prices are low, sell when they are high. And then wait. While waiting, get the rent and give time for the return to take effect. In their methodology, they do not have a 3 to 5 year return on investment but rather at least 10 to 15 years.
Buying a property is not the most complicated part. Nor is the waiting. The maintenance and management of the property, for example, is much more complex.
Buying and managing one unit can be seen as an additional income and a hobby for an individual.
Managing between 100 units and 1,000 units immediately becomes a different business.
Managing more than 10,000 units becomes a whole new industry and a new business model.
Reaching this type of magnitude, it is important to have a concentration of assets in one place for efficient management of invested capital.
II – Economies of scale
Imagine managing 18,000 units with an average of 2.5 tenants per unit – that’s over 45,000 tenants. If you don’t have a structure in place to maintain strict processes, your own team, your own network of professionals to negotiate discounts on materials, you are headed straight for bankruptcy.
How can you be profitable when you manage 18,000 units in 50 different cities? You may be diversified, but managing and reducing costs is impossible. Instead of reaching a critical mass to reduce your fixed and variable costs, you increase them.
Concentrating in one area allows you to have your own agile and competent in-house team to repair and renovate the real estate. In their heyday, the Jacobson brothers had a team of about 20 people in Montreal. They called this close-knit guard “the commandos”.
Conversely, if you are diversified in 50 different cities, you need at least one person per city, which is already more than double the number of employees that the Jacobson brothers had in Montreal. The other option, if you don’t want to have an employee in each city, is to hire a management company. Your profitability will be greatly impacted and it is very likely that you may fail.
III – The multiplier coefficient
Another motive for concentrating properties in one area is the multiplier coefficient. For example, when you own half of a street and decide to build a playground with the help of the city council. You’ve spent that money once, but it’s reflected exponentially in the value of your portfolio. Every property on this street will appreciate in value as a result of this facility.
Confirmation of their business model can be seen in their tenants. In the last few years before selling their portfolios, the tenants sought out the neighborhoods owned by the two brothers. The tenants were willing to pay more, and more consistently, to stay in the area. In 15 years, they had significantly improved the living conditions of the neighborhoods where they had concentrated their efforts. The proof is in the pudding.
IV – Duplication
After selling their portfolio, just before the subprime crisis, they replicated their methods in North Carolina with 6,000 units. They were not able to create the same momentum as in Montreal because they did not live there. However, upon resale their real estate portfolios had appreciated significantly.
In 2011, Tony Goldman*, one of their inspirations started investing heavily in a bad neighborhood in Miami. That same year Remy and Jean-Marc followed him by purchasing real estate assets in this area.
*Starting in the 1970s, Tony Goldman focused on revitalizing just the Soho neighborhood in New York City for over a decade. Today it is one of the most pleasant and well-known neighborhoods in New York. In the 1990’s, he took on Miami with South Beach. After these 2 successes, Tony Goldman focused on Wynwood.
This neighborhood was called Wynwood and was composed of abandoned warehouses. Wynwood had the attraction of being close to the design district where luxury stores are located. The two brothers followed him closely by also buying hangars and warehouses. At that time, the district was so dangerous that the police asked them to leave at 5 in the afternoon.
For 5 years, they opted not to have tenants. They still had to pay taxes and maintenance of the buildings. As you can imagine, during this time, they had a negative return with no certainty on a potential capital gain at resale. Six years later, they have made some great deals, such as this property sold for $22 million and purchased for $3 million a few years earlier:
https://therealdeal.com/miami/2016/04/20/remy-jacobson-buys-design-district-church-for-10-5m/
Ten years later in 2022, we find this neighborhood to be the headquarters of major companies such as Blockchain.com, Spotify, and other large groups. In that short amount of time, Tony Goldman has taken Wynwood from a dangerous and unsanitary neighborhood to Miami’s premier art district.
In creating RealT, the Jacobson brothers aim to apply that winning method again to create something even greater. The mentality of RealT is not: “Here, I’ll buy this property because the return is attractive,” but rather how I can buy this property – and the one next to it – to improve the street and neighborhood. To achieve this plan, it is important not to have a 3 to 5 year vision of return on investment but a 10 to 15 year vision, minimum. RealT’s business model, and decentralized finance, combine the short term vision of some investors with the long term vision of other investors. We no longer need to make the real estate liquid when the RealTokens are holding the real estate. This concept will be examined in future articles.
In the next article, we will see why RealT has chosen to start with the city of Detroit.
Disclosure
This information is not an offer to invest in any token or other opportunity and is provided for information only. Any offer to sell or solicitation to buy interests in the Issuance will be made only by means of an offering memorandum delivered by an employee or agent of the Issuer. Any references to past performances are informational and cannot be considered to indicate or guarantee any future results. Investing in crypto currencies involves a substantial degree of risk. There can be no assurance that the investment objectives described herein will be achieved. Investment losses may occur, and investors could lose some or all of their investment. Performance results are shown net of all fees, costs, and expenses associated with the token. Should an investor choose to redeem a token through RealT or on a secondary market, other processing fees may be assessed that are not factored into the returns presented.
