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OWNR: Lease instead of rent

Hamburger Startup puts properties for sale on rental market - leasing becoming funding model

When Nils T Kohle arrived in Hamburg more than four and a half years ago, he managed to sell his flat in a pre-war building in Bremen for a decent price. Nevertheless, nothing comparable could be found for the money on the Hamburg property market, which is seen as an expensive location. And things have not improved. The 2018 LBS Property Market Atlas 2018 “Hamburg and its Environs” recorded rent increases for detached and semi-detached homes of 28.2 per cent for the period 2013 to 2018. That rose to 41.5 per cent for owner-occupied properties. The result: The higher the purchase price for property, the higher the rental demanded, if it is not bought for occupation by the owner.

OWNR aims to boost supply to cut rentals

On the basis of his experience that high prices are often demanded for Hamburg properties in serious need of attention – both for properties for sale and rent, Kohle, 42, thought about how he could change this situation. “The explanation lies of course in high demand facing limited supply. So, the question is: How can supply be increased? And the answer: By drawing properties for sale onto the rental market.” And for this, a new financing model is necessary, Kohle realized. “And so we ended up at leasing.”

OWNR Nils T. Kohle

Contract ends: Move out, extend or buy

This is how the OWNR model works. The business works closely with different estate agents, including Engel & Völkers, currently providing a range of more than 3,000 properties to potential interested parties. “Basically, these are all the Hamburg properties currently on the market – this makes us the most comprehensive property portal in the region,” Kohle says. The leasing terms run from 18 to 48 months. When the contract is up, OWNR buys the property and has it fully refurbished, where necessary. Six months before the end of the lease, the tenant chooses: Move out, remain a tenant under a rental contract, or buy at a previously agreed price. “It works basically the same way as leasing a car,” Kohle explains. “But the contract is a rental contract to 85 per cent, for legal reasons. We cannot, and do not want to, circumvent tenancy law.”

Goal: 2020 leasing rates 5 per cent lower than average rents

Kohle, along with his co-founders Roland Wenidoppler, David Raabe and Sandeep Agarwal, aims to have his leasing rates 5 per cent below the average rent by 2020 “and to do so with properly refurbished properties.” Greater market transparency is expected make this possible with the aid of artificial intelligence (AI). “We are automating our property evaluation. First of all, our AI analyses the data put out by the seller, along with general market data, the age and size of the property and the refurbishment required,” Kohle said. The idea is that the more transparent the market is, the easier the negotiations. Secondly, OWNR as a bulk buyer can secure a reduction in estate agent’s fees and is able to negotiate better terms by co-operating with three large specialized companies on the refurbishments.

OWNR idea: Hamburg today, Europe tomorrow

OWNR is being financed by various private investors, and soon by a standard bank loan to the amount of around EUR 500 million. “We are planning to buy between 750 and 1,000 homes for EUR 500,000 on average, including additional costs.” The experience gained by Sandeep Agarwal, “who was until recently Chairman Debt Capital Markets EMEA for Credit Suisse in London”, is assisting with the loan negotiations, Kohle said. In line with the price class, the properties are largely in areas like Barmbek, Lokstedt and Rahlstedt, less in upmarket areas like Winterhude and Eppendorf. Social ideas played a major role in setting up OWNR in August 2017, Kohle said. But the start-up also aims to earn money. “We will achieve this by classic economies of scale,” the business administration graduate says. “We launched in Hamburg, but recently opened a London office. Another will be added in Berlin in late March.” Around ten German cities might be promising for OWNR, Kohle believes. “The European market is of course correspondingly larger.”

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