Investing Talks - Artur Mariano

Investing Talks

Name: Artur Mariano

Age: 34

Country of birth: Portugal

City of residence: Guarda

Biographical note:

Let's start our conversation by finding out a bit more about Artur Mariano's story/path: childhood, youth, first steps in his professional career, first dreams...

I've always been drawn to scale and creating value. One of the big changes in my life came when I read an interview with Sousa Cintra, who told of his life story in Brazil and his desire to found a bank.

When I was 15, I was already trading REITs from a computer in Guarda, in my bedroom. And back then I knew cities like San Francisco or Boston by the block, even though I'd never been there. The forums back then were extremely rich, everyone taught everything without limits, but there was only such a thing in the United States.

When I entered the University of Minho (to study Computer Science) my interest in investment cooled, but I picked it up again just before my PhD. And after my PhD, with six-figure offers to continue in teaching and science, I decided to follow my dream and focus on my property business.

How did Artur Mariano start his career in the property sector? What were his first steps in this field?

My family has no ties to the industry. When I started investing in shares and moved on to REITs, I already knew that I wanted to invest in physical property, for the "tangibility" factor. But I didn't realise that there was a financial incentive in doing so. At some point, I discovered it: leverage. In property it's possible, cheap and natural, in other assets it's not.

"The property market always has investment opportunities."

What challenges did you face at the beginning of your career as a property investor and how did you overcome them?
It may sound unintelligent, but it's the honest answer: too little capital. Not for the obvious reasons, but because when I started, I soon found several opportunities worth up to 30% a year, gross. We were living in the aftermath of the subprime crisis. If I'd been able to leverage more, I'd be at a level today where I probably won't be for another 4 or 5 years.
Throughout your career, which types of property have been the most profitable for you and why?
Resale property. The reason is that the need to add value to the business is not proportional to the final resale price.
How do you deal with risk management when investing in property? What strategies does Artur Mariano use to mitigate potential problems?
Over the years, I've set up a due diligence process that ends up "covering" most of the risk. Whether it's a full validation of the market in order to rent or resell the property, or a prior inspection of the property or obtaining quotes for works (if it's my construction company, the specifications are closed) always before the purchase. Of course, over the years, having a team to deal with the various stages of the process has made it possible to scale up. For example, for many years I analysed all the documents for all the properties I bought, today it's my companies' legal department that does it.
In the course of your career, have you ever had a property investment that didn't work out? What did you learn from that experience?

Yes, of course.

I learnt that the processes I had weren't mature enough, that we can't trust people blindly and that, at the end of the day, our intuition works better than complex algorithms.

How does Artur Mariano assess the current property market? Are there specific sectors or regions where he sees more opportunities?

The market as a whole is overvalued at the time of this reply. In my opinion, the two reasons for this are the lack of stock and the increase in purchasing capacity in recent years (through credit or otherwise).

However, there are many opportunities today. The property market always has investment opportunities. Whether it's the wide range of potential buyers - as is the case today - for the right product, or buying at well below intrinsic values, as we experienced 10 years ago.

In the future, I believe that the logistics sector has considerable scope for progression and I've been trying to strengthen this sector in my portfolio

What trends or changes are you currently seeing in the property sector and how might these influence your future investments?

In Portugal, or in the world?

In many countries, we see the "commercial" sector, especially in offices, shrinking fast. Teleworking and the new business model big tech have provided that.

In the residential sector, the rise in interest rates doesn't seem to have (yet) conditioned the market very considerably.

In the logistics and industrial sector, I think the increase in ecommerce generalist in our country will provide opportunities for bolder investors who don't value instant gratification so much.

How have you honed your negotiating and decision-making skills in the property sector over time?

I think I've always been able to negotiate, and as strange as this may sound, today is no better than before - perhaps it's even worse. This is because if I used to have a target of 20% for a deal, I wouldn't do it for 19%. I was a dog that wouldn't let go of the bone and if the bone was thinner than I wanted, I'd look for another bone.

Today (also due to the lack of product), my negotiation is more considered, mature and flexible. But what I may lose in "fierce margin", I gain in process.

In your opinion, what was the most rewarding property investment you've ever made and why?
The resale of a property in a few weeks with an infinite profit (because it was 100% financed), which allowed me to make a 6-figure profit in that space of time. It may not have been one of the five best deals I've ever done, but it was the one that made the biggest impression on me.
Do you actively participate in the management of your enterprises or do you prefer to delegate this responsibility? Why? Which procedures do you never delegate and why?

It's not a question of preference, but of necessity. It's impossible for me to be involved in my business throughout the whole process after selecting the properties, because of the lack of time.

Fortunately, I have a multidisciplinary and competent team that allows me to do this; there are many properties that I have bought and resold without ever going near them, and I would venture to say that I have never entered more than 70% or 80% of the properties in our rental portfolio. And for the future, this will only increase.

Training is very important to you. Has training now overtaken property investment in your business?
No, I don't even think it's possible. Training is an exponentially smaller market than the property market, which, at the very least, can be considered uncapped. To give you an idea, a property business can easily exceed the annual turnover of our training company.
What are your expectations and forecasts for the property market in Portugal over the next few years? Do you expect a slowdown in demand for investment property or do you not see it that way? What about the rental market? Do you think that the Mais Habitação (More Housing) package recently approved in Parliament will bring results in the short, medium and long term?

It's difficult to make predictions out in the open.

The slowdown has to be a reality, because otherwise everything we know about market theory would be wrong. Rising interest rates and a declining economy will inevitably slow down demand.

I believe that renting will be increasingly in demand, not least because of the natural decline in buying that financial economic globalisation will impose.

As for the Mais Habitação package, I think it's a pot of foam that will have little (if any) impact on the market.

What are the main performance indicators that Artur Mariano analyses to assess the health of the property market?

In a nutshell: the household effort rate on loans, housing and income appreciation relative to property appreciation.

What are Artur Mariano's future plans for expanding its services or exploring new opportunities in the market?

My plan is to develop our fund to raise capital on the stock exchange and be regulated. But that doesn't mean that we'll do it when we can. This requires us to have an annual turnover of over 25 million euros and assets of no less than 100 million. And, above all, to have a board management and an operation (which I see as people + processes) that is much better tuned and oiled. And that is target, which doesn't mean that reaching the targetLet's implement everything it allows us to.

What are your long-term plans for your career? Do you see yourself in this sector for many years to come? Do you see this context of constant uncertainty as a problem or an opportunity?

Real estate is not a sector where I want to make money and leave. It's not that this isn't valid (quite the opposite, as I teach my students), but I love the sector too much to leave it. I believe today that I'll be in real estate forever and with an active voice. And, with the proper distance, have a similar path to Sam Zell, for example (with the proviso of public capital already made).

As for the second question: all uncertainty is good for the mature investor.

What was the most challenging project you've ever worked on and why? Would you like to share a specific aspect of that challenge?

Setting up and running a construction company. It's a very intense sector with hyper-active management where everything from the management of goods to personnel has to be rigorously applied.

Would you like to leave a message for stakeholders in the property sector?
The same as always. Look at the market for 60 years, not 60 days.

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