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Twin Summits Capital (TSC)

Data driven investments

US single family

TSC's Alternative investment manager,

Focuses on acquiring, and managing single-unit
residential portfolios for institutional investors.

£100m
100
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We explore different real asset classes and geographies looking to disturb institutional investment management.

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About TSC:



Twin Summits Capital is a data-driven alternative investment manager [TSC AIM] and analytical research lab [TSC iLAB]. We develop bespoke solutions for partners who want exposure to new asset classes and investment strategies on scale. TSC comprises both investment and technology professionals.

At present the firm's primary focus is on residential real estate in the UK, Europe and North America; for which TSC iLAB has developed proprietary technology enabling AIM to strategically target alpha, while scaling and managing large portfolios of single unit residential assets for our investors (e.g. single family homes).

At TSC we look to fully integrate technology across both our investment and asset management processes, so we can reduce costs for our investors, streamline our fund operations, attempt to generate alpha, and unlock new strategies.

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What we do:

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US Single Family Homes & Condo Strategy

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UK Single Family Homes & Condo Strategy

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Special Situations

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The 'existing' residential real estate sector is the biggest asset class in the world and technology has now opened it up to institutional investors!

Likewise for multifamily in the early 1990s, where apartments/flats were c.10% of the NCREIF Property Index, and today they account for 26.5%. This means over 60% of MFR assets are now owned by institutional investors.

The growth trajectory of SFR closely mirrors what the market saw happen for self-storage - where SS was less than 10% institutionally owned in the early 2000s and is now primarily all institutionally owned.

In the US in 2020, it is estimated that there are 14 million non-institutional rental homes vs 436 thousand institutionally owned homes (roughly 3% of the market). By 2030 it is estimated institutional will hit 7.6 million (40%).

Why US & UK Single-family homes + Single-unit residential assets

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UK

USA

Types of US & UK Single-family homes + Single-unit assets

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Residential real estate is the biggest asset class in the world, from which US Single Family Homes is the largest contributor, currently accounting for c3 trillion dollars. The US-SFR market became institutionally accessible in 2010, due to advances in technology driving down operating costs. As a result, institutional investment in the US quickly grew from minimal involvement pre-GFC to an estimated 250k+ homes. TSC’s senior management team were amongst the group of intial investors who helped to institutionalise single family homes as an asset class and continue to help lead innovation in this sector today. Why SFR? With bond yields at historic lows and inflation becoming a significant concern for investors, stabilised portfolios of SFR assets make a compelling investment case given their stable cash flows and inflation hedging ability. The investment thesis for this asset class is further strengthened by it's strong underlying fundamentals, higher rent and occupancy growth rates versus other sectors (e.g. commercial and retail) and arguably an ongoing structural shift towards renting versus owning due to affordability constraints for the younger generation in many markets.

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Institutional buy-to-let (i-BTL)
vs build-to rent (BTR)

While both Institutional Buy-to-Let (i-BTL) and Build-to-Let (BTL) have their merits, and equally warrant a place in truly diversified residential portfolio, i-BTL has some key advantages over BTL. Namely:

1) Scalability

2) Diversification

3) Ability to target alpha

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Institutional buy-to-let (i-BTL)
vs build-to rent (BTR)

While both Institutional Buy-to-Let (i-BTL) and Build-to-Let (BTL) have their merits, and equally warrant a place in truly diversified residential portfolio, i-BTL has some key advantages over BTL. Namely:

1) Scalability

2) Diversification

3) Ability to target alpha

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In both the US and the UK, the residential build-to-rent (BTR) sector is growing fast and attracting a lot of institutional interest. In the UK, BTR platforms are regularly being announced by large institutions looking to gain exposure to the UK PRS sector. A problem with investors relying solely on BTR as a method of origination is they limit themselves to targeting only a small portion of a given country's residential market and tenant demographic. But more importantly BTR is significantly less scalable than institutional buy-to-let (i-BTL), which mean investors can put less capital to work per annum. i-BTL platforms, on the other hand, can unlock the institutional potential of a country's existing stockpile for investors as they acquire from a much larger market, which dwarfs the fraction of sites available to BTR developers to build on. That said, it is important that when an i-buyer platform is being developed and set up in a country it is done correctly with the right technology, data feeds, and management expertise needed to run an i-buyer strategy. This is because i-BTl vs BTR requires a very different approach to asset and property management, given the assets that are being managed are spread out and not concentrated over a few sites. It would be, all but, impossible to run an i-buyer strategy in a traditional way without the aid of technology. Should investors elect to build exposure to a country's residential sector through the i-BTL channel vs BTR (or to supplement their new build exposure), investors will be able to receive; i) income producing portfolios in a fraction of the time (Months vs Years), ii) tailor made portfolios for different risk reward appetites, iii) a more diversified portfolio (by both housing and tenant type), iv) a portfolio with less concentration risk, and v) a portfolio that has been built to target alpha specifically, and as such has in it only properties which are likely to outperform the market. The aforementioned is not possible with BTR due to the number of potential development sites in a country being much smaller than the number of homes (meaning liquidity is an issue) and the time horizons associated with building properties vs simply buying and renovating (Years vs Months).

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TSC AIM's - K2 Transparency

4. Acquire, Refurb, Manage

->

3. Optimise/Select

->

2. Analyse/Cluster

->

1. Compile data

Bringing Quantitative Finance To Real Estate

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TSC AIM's - K2 Transparency

4. Acquire, Refurb, Manage

->

3. Optimise/Select

->

2. Analyse/Cluster

->

1. Compile data

Bringing Quantitative Finance To Real Estate

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As the US-SFR sector has matured, so has the technology funds used to acquire, stabilize and manage large portfolios of SFR assets. Platforms that have been investing in their tech stack can now use algorithms to screen a country's entire property market in real time to best match properties that are currently available for sale with their investors' acquisition sand boxes. At TSC, we can do the above while also targeting our investors' alpha. We do this by leveraging a mixture of feature analysis, relative value analysis, and machine learning to identify properties that look likely to outperform the market. The investment management team will then use a mixture of clustering and optimisation algorithms to tailor each investor's portfolio. This ensures the assets being acquired are best suited to match any bespoke preferences and or requirements e.g. income/capital tilts, risk/reward tolerance, ESG mandates, refurb alpha etc.

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By undertaking works like these we can not only help reduce each homes carbon footprint but also help to lower utility bills for tennats.

Replacing old boilers

Installing smart thermostats

Replacing old lighting systems with LEDs

Installing electronic gas and electricty meters

Increasing insulation

Common areas for improvement are:

At TSC we therefore work with our investors and partners to improve the energy efficiency of each home acquired where possible.

In comparison 21% of owner-occupiers, 12% of council households and 11% of those in housing association properties receive government subsidies.

Yet despite this, just 5% of private rented households across England have received any financial support from government programs to improve the energy efficiency of housing.

If we take the UK for example, where the TSC is based, according to the latest 'English Housing Survey' a third of private rented sector housing was built before 1919 and, 84% of properties built before 1919 had an energy rating or D or worse.
From which it is estimated 62% still have an energy rating of D or below.

Given that 99% of most countries homes are existing stock and not new builds it is therefore important that investor and governments don't solely concentrate on building new homes but also look to modernising and improving old stock.

When acquiring assets through the i-BTL origination channel investors are presented with an unique opportunity to help improve the energy efficiency of homes which have already built in a country .

focus at

Improving the environmental impact of the existing housing stock & helping tenants own

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By undertaking works like these we can not only help reduce each homes carbon footprint but also help to lower utility bills for tennats.

Replacing old boilers

Installing smart thermostats

Replacing old lighting systems with LEDs

Installing electronic gas and electricty meters

Increasing insulation

Common areas for improvement are:

At TSC we therefore work with our investors and partners to improve the energy efficiency of each home acquired where possible.

In comparison 21% of owner-occupiers, 12% of council households and 11% of those in housing association properties receive government subsidies.

Yet despite this, just 5% of private rented households across England have received any financial support from government programs to improve the energy efficiency of housing.

If we take the UK for example, where the TSC is based, according to the latest 'English Housing Survey' a third of private rented sector housing was built before 1919 and, 84% of properties built before 1919 had an energy rating or D or worse.
From which it is estimated 62% still have an energy rating of D or below.

Given that 99% of most countries homes are existing stock and not new builds it is therefore important that investor and governments don't solely concentrate on building new homes but also look to modernising and improving old stock.

When acquiring assets through the i-BTL origination channel investors are presented with an unique opportunity to help improve the energy efficiency of homes which have already built in a country .

focus at

Improving the environmental impact of the existing housing stock & helping tenants own

PlayPause
By acquiring and renovating stock from a country's existing stock pile, investors can help to improve both the environmental impact and energy efficiency of older homes, whilst avoiding the high carbon-cost associated with BTR developments (e.g. construction and demolition costs - which can often entail knocking down perfectly good homes to make way for new developments sites). Additionally, when investors elect to include a co-ownership or right to own scheme for a portion of the properties in their portfolios (whereby tenants jointly own the property with the investor or after several years are allowed to purchase their rental property in full at a fixed price) not only can investors reduce their portfolio risk, but they will be continually injecting modernised, refurbished and environmentally friendly homes back into that country's sector. This also helps aspiring homeowners feel more at home in their rental homes, knowing they can own them one day. While right to own schemes are possible for BTR properties too, given the homogeneity of most BTR products being developed (often made like this on purpose to reduce costs) BTR properties are often seen as more transitory. Also it has been shown that when tenants have the possibility of buying their rental home, they normally look after them better, in turn reducing opex costs, turnover and voids.

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Our Summits:



TSC AIM:

primary focus is on real assets, however this does not restrict its investment universe. Through a mixture of top-down and bottom-up strategies, AIM invests across a wide spectrum of asset classes, considering both traditional and alternative investments for clients. To best serve clients’ capital needs, Twin Summits AIM offers both funds and non-collateralised investment structures in which to invest. This allows us to react quickly to the changing market, and execute point in time investments with a selected number of investors.



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TSC iLAB:

develops new technologies and platforms to enable AIM to operate efficiently across the value chain for live strategies. iLAB also supports AIM and a selected number of Twin Summits' partners/ investors by undertaking research mandates in areas where they require more exposure; e.g. new areas for insurance and pension firms to deploy capital, such as insuretech opportunities, an industry Twin Summits staff have experience working in.



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