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The Family Office Bullish On Asia, Its 'Wave Of Investment Opportunities' | Sasha Bernier, SVP, Cheltenham Investments | Q&A

by trusted insight posted 2years ago 5366 views
Sasha Bernier is the senior vice president and investment committee member of Cheltenham Investments, a single-family office seeking to invest opportunistically in real estate. The investments are primarily allocated in real estate opportunities and lower middle market companies. In this interview, he discusses why he thinks blockchain will have a major impact on real estate investing; why he encourages investors to study Asia and its tidal wave of investment opportunities; and how his academic background in law informs his approach to the markets.

Bernier is also an international advisor to Ikove Capital, a startup nursery focused on deep tech with a focus on Asian Strategy. Previously, he served as the vice president of Revere Capital, a real estate debt fund with the responsibility for underwriting and structuring new investment opportunities in the real estate debt space. Bernier holds a JD from the University of Pennsylvania Law School and a B.S. in business administration from the University of North Carolina at Chapel Hill.

Sasha Bernier was named on Trusted Insight's 2018 Top 30 Real Estate Investors At Family Offices. This interview has been edited and condensed. 

Trusted Insight: A high percentage of people that enter the family office space say that they fell into it. How did you get started at Cheltenham Investments?

Sasha Bernier: That’s so funny, and it’s exactly right. I didn't even know what a family office was. By way of background, I went to a hedge fund that basically collapsed during the financial crisis. Then I went to work at another hedge fund, that was an activist fund. At that time, I was becoming disillusioned with the whole hedge fund industry.

One of the advisors at that hedge fund was the principal of his own family office and he had made money in real estate. We were looking at a supermarket chain, Super Value, and we were looking to separate Super Value from the real estate. I was assigned to work with the advisor on the real estate side. I was nervous because he was wicked smart, had very high expectations, and everyone was scared of him. He does every math problem in his head, can dissect information really quickly, and lets you know the pros and cons of an idea at amazing speed. He was super sharp, but very scary at the time. When I was assigned to him, it ended up being a blessing in disguise. It was my first real estate deep-dive analysis. We went through it, we looked at separating Super Value from the real estate aspect. I worked with him for six months on it, and it helped us build a very tight bond.


"We were fortunate to be able to sign a global deal with Bloomberg. And right now, I'm working with two other groups in Asia to build a pilot program."

At some point, he decided that he wanted to concentrate more on the family office side, and he asked me if I wanted to come along. I did, but I didn't know what it was. At the hedge fund, there was a new other real estate family office that stayed on our floor. And I remember them saying “We're a family office,” and I didn't really know what it was. My mentor was like, “just come and help me with the family office.” That was eight years ago. In the early part of my career, I didn't know what a hedge fund was, and then hedge funds blew up. Now that’s the case with family offices. It's funny looking back now, but I accidentally got into this branch of investing.

Trusted Insight: Single-family offices have grown substantially in the number of sophisticated investment offices that exist in the U.S. and globally. How does Cheltenham Investments stand out from the herd?

Sasha Bernier: Our principal made money in the multi-family game, and did it way before it became institutional and the common investment. Everyone does multi-family now. They buy real estate and they do the value add program without understand if there is real value. My principal was doing that almost 25 years ago when buying lower class properties was not institutional. Now, it's very institutional and everyone is going after it. He created his own wealth through that. He's also COO of a family driven real estate company that’s been developing New York City Properties for over 70 years.

I'm actively out on the road trying to source new investments, because the principals concentrate on the day-to-day business. We actively looking for things that fit our principles. We don't really try to differentiate ourselves. We know exactly what we want and what we're looking for.


"Blockchain will definitely disrupt some main aspects of the real estate industry, especially title. In the future, I think you won't really need the title because blockchain will be the open source for people to see who really owns which properties."

When it comes to real estate, we're flexible. We invest up and down the capital structure, whether it's debt, equity. We try our best to understand the market. My principal always says I am not the Mr. X fund, this is our capital. This is what I'm trying to explain to people that I meet. We're not going to chase deals. We're not like a fund where we have to get a deal done. The deal doesn't make sense, we just don't do it.

Right now, we are negative on equity, especially in multi-family, because rates are going up, and people are still bidding for things as if rates aren't going up. It doesn't make any sense to us. We are very cautious on the equity side. We're waiting to see if there will be a turnaround. We think the markets are frothy, New York City is extremely frothy, and we think that a lot of the multi-value stuff in the Southeast that are being churned out. We are very cautious.

Right now, we're looking for more opportunistic ways. We were a fund partner with a group that's buying mobile homes in the Midwest. It was a clear story, we like that space as a lot of institutional guys are not in the space. We really tend to look for opportunistic plays. We look at new management sponsors who have a clear thesis and idea. We're not looking to separate ourselves from other people, we're looking to stick to our principles. Good value, trading at a below replacement cost, and hopefully good cash flow.

Trusted Insight: Can you tell us more about the tech platform you’re building out in China?

Sasha Bernier: I’m an investor and advisor to a tech platform that I invested in. It's called Ikove Capital. Essentially, we’re investing in universities that have patents with deep tech ideas. I'm helping with the Asia strategy, because I believe Asia is now the center of growth. Outside of China and India, Southeast Asia has over 600 million people. The middle class there is growing rapidly. One of the companies that we are involved with is an artificial intelligence company called Cognovi Labs. I've used my network in Asia to help build a clientele and presence.


"Going to law school has helped me make investment decisions in a very methodical, mechanical way. It has allowed me to think about all facets and parties involved. It also helps me think in a very skeptical way."

We were fortunate to be able to sign a global deal with Bloomberg. And right now, I'm working with two other groups in Asia to build a pilot program. The cool thing about working in a family office is that you work with other families that are like minded. I enjoy meeting like-minded investors. I'm building the portfolio out and helping build out the Asia platform. It's really important for us to be in Asia.

Trusted Insight: The real estate industry has managed to stay relatively hidden from major tech disruptions as compared to other industries. Do you see this trend persisting or do you see machine learning becoming the disruptive wave that transforms the real estate industry?

Sasha Bernier: There are various types of technologies that will disrupt the space. Blockchain will definitely disrupt some main aspects of the real estate industry, especially title. I think most already understand how blockchain works. In the future, I think you won't really need the title because blockchain will be the open source for people to see who really owns which properties.

In certain instances, you'll also see artificial intelligence change real estate. For instance, there are programs that allow you to get a sense of measurements of a building. If you're constructing a building and something goes off measurement, artificial intelligence might be able to tell you that there’s a mistake with this aspect of the building. We'll also be able to use artificial intelligence for marketing purposes. I know the artificial intelligence that we're using allows you to understand how people will behave. We'll be able to have more specific marketing plans.

I believe that technology will disrupt a lot of what we're seeing. It’ll change things for the better. We'll be able to create smarter buildings that will be more energy compliant and save energy. That is an aspect of technology that will revolutionize the real estate space.

Trusted Insight: Besides investing in real estate, Cheltenham Investments looks at hard assets like aircraft and vessels. What other unique areas or sectors of the market interest you right now?

Sasha Bernier: It's basically a twofold pronged approach. The reason we look at hard assets is that we want to understand what we get back if all things go wrong and we need a liquidation value. I'll tell you a funny story. One of our major principles is that our partners put in money in an investment, to ensure that if we lose money, both partners lose money. And if you make money, both partners will make money.

In 2012, we were looking at a project in Chile, where essentially the individual was taking on waste that had iron ore in it and would deliver the iron to China. At the time, China was buying so much iron that we liked the idea that this person came up with, because it was already at a concrete location with no mining risk. The idea was to extract the iron out of the waste products and ship it. We were excited and we were digging in. We knew what our downside was as we knew that the market for iron ore was, Then, we found out that we were putting in like 99 percent of the capital and that our partner was going to make 30x his money, and we were going to make a set return.

We were like wait a second, what's going on, why are you making all this money? This goes back to my statement of having certain principles. We want to make sure that if our partners lose money they feel pain also not just us.

We like to look at the hard assets because it gives us cash flow and an understanding of what we get if all other things go wrong. This is why real estate has always been the most attractive aspect for us.

Trusted Insight: To what extent does your JD degree influence and inform your investment approach?

Sasha Bernier: When I went to law school, I didn't really know what I wanted to do. I come from traditional parents, my mom is Asian. In our culture, it's very important that you do something that your family members understand, whether it's a doctor, lawyer, something that's concrete. I did graduate in finance with a B.S. at the University of North Carolina at Chapel Hill but I went to law school not really sure what direction I wanted to take after the tech bubble. I took classes Wharton so I was exposed to a lot of people that were doing exciting things in the business world and at that point, I decided I wanted to do something more in the finance world.

Going to law school has helped me make investment decisions in a very methodical, mechanical way. It has allowed me to think about all facets and parties involved. It also helps me think in a very skeptical way. Especially today, when you see people making investments in new cryptocurrencies or blockchain type ideas every five seconds. A law degree has helped me be more critical and do a lot more research into things before investing.

I believe it was a very good background in terms of helping with the research aspect of an investment or even processing things. Law school teaches you how to come up with a process and a set of principles. I believe that combined with a mentor allowed me to think critically before I make decisions as an investor.

Trusted Insight: Is there anything that we’ve failed to ask that you’d like to share with our LP community?

Sasha Bernier: This is a market that we have to be very, very cautious. Prices on all asset classes are at record levels. There's a wave of new investing ideas, so there's cryptocurrency, blockchains, everyone's coming out with something new, and different. The most important thing beyond this craze is to have your own set of principles. Have something that guides you, whether it's real estate, whether it's technology, something that you stick to.

You can be flexible in how you think but keep around those core principles much like Warren Buffett and his set of principles. Throughout this wave of new things and markets going up, there will be a shake-out and we can’t predict will that will be. It's better to be cautious in this environment. At the same time, keep an open mind.

Being in Asia this summer has really been eye-opening. I encourage investors to study the region. The Asian middle class is growing rapidly unleashing a wave of investment opportunities even with the current currency vibrations (this could actually be an opportunity).

Lastly, the technology arena, especially with artificial intelligence, IOT, blockchain, is disrupting the world as we know it and as investors, we should embrace those changes and take the initiatives to learn as much as possible because most of us are capable of learning and understanding these revolutionary paradigm shifts. Just stick to the principles that you have learned.

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