We recently interviewed the founders of Fractal, a fractional ownership real estate platform that has just raised $30m. This new company, based in London, makes it easy for consumers from the Middle Eastern, North African and other high-growth markets to purchase homes in major European cities.
The Founders - Ladih Kaddoura and Wadih Abou Bechara
Fractal is an idea conceived by Ladih Kaddoura and Wadih Abou Bechara, both of whom originally come from the Middle East, one Lebanon, the other Egypt. Both have financial acumen, with Labib working for JP Morgan Chase, Bank of America and Merrill Lynch. He met Wadih at McGill University in Montreal, where Wadih received an MBA, as well as an Engineering degree. Both speak French, Arabic and English, and understand the needs and wants of the Middle East buyer, as they co-founded a successful debt advisory company in Dubai. At present, they both live in London, and have had interest in shared fractional residences for several years.
Fractal Model
Fractal is no timeshare, nor is it a Private Residence Club. It is something different, and it has already raised $30m in seed funding from White Star Capital, a multi-stage global venture capital platform that operates out of New York, London, Paris, Montreal, Toronto, and Tokyo.
Both gentlemen identified challenges that have arisen for consumers from the Middle East and Africa when trying to purchase property overseas, many wishing to diversify away from assets in their home countries, but having limited access to cross-border financing, and are more attracted to cities for both work and leisure. Fractal, makes it easier for clients from Middle Eastern, and North African countries, as well as other high-growth markets to purchase homes in major European cities. Their buyers from the Middle East tend to be cash buyers as it’s historically very difficult for them to obtain financing in Europe. And by offering fractional shares, Fractal says it provides a type of “synthetic leverage” allowing them to buy their dream home at 1/8 of the cost. Fractal also handles all maintenance and management.
With a greater understanding of the vacation needs and wants of their clients, and with a strong exit strategy, Fractal has moved into an interesting place in the shared residence industry. For the current four properties in London pricing starts at £125,000 for a share in a studio appartment and goes up to £275,000 for a share in a recently refurbished 2 bedroom apartment on Kensington High Street.
SherpaReport talked to Wadih Abou Bechara and Labib Kaddoura about the founding of Fractal and their future vision and plans:
SherpaReport: First, why did you launch Fractal now? Was there method in choosing this time?
Mr. Kaddoura: Yes - We think that there is major financial movement in these post-pandemic times. We have also seen that secondary home transactions in Europe and on the continent have grown exponentially, as many now, due to the pandemic, choose work and live remotely, yet feel a stronger connection than ever before to family and family time.
Mr. Abou Bechara: Further, many look at second home ownership in terms of time used – which is usually between 6 and 9 weeks. Fractal offers buyers the opportunity to purchase anywhere between 1/8 and ½ unit. This means they truly own the property through a limited liability company. The initial capital and operational outlays are reduced through this co-ownership model. We think that all this taken together is a good time to have created and launched Fractal.
SherpaReport: Taken as a whole, what is the mission and vision of Fractal?
Mr. Kaddoura: The mission and vision are simple - it is to better understand the client and the buyer - what they want, how they would like to spend their time with family or families. Many of our interested parties are from Europe, the Middle East, and North Africa.
Mr. Abou Bechara: We have been surprised by the quality and quantity of customer demand. Further in our experience many clients wish to diversify, in cities away from their home countries. This type of financing has been difficult, but with Fractal, it is made easier. Many of our clients are more attracted to cities for both work and leisure. Fractal helps with all this.
SherpaReport: How does Fractal overcome the idea that it is unique to the field, not another timeshare?
Mr. Abou Bechara: This is not difficult - as timeshares sell time, Fractal sells and the owner owns, a share of the real estate. Timeshares also have no benefit from any potential property value appreciation when the property is sold, and generally, timeshares have no exit strategy. Fractal’s properties are sold in year ten. But also, if you want to exit in say 2-3 years, we ask you to come to us and we will work with you.
Further Fractal is not a club, it offers interested people a way to invest in the properties for them to use for a vacation or for work or both. You can own the home of your dreams, and have influence in the interior design, if this is what you are interested in.
SherpaReport: Where are your residences now, and where do you want them to be within this year and maybe next?
Mr. Kaddoura: Right now, there are four properties - in London, in Chelsea (pictured above), Notting Hill, and Kensington. In another few years we will have six more. Soon we will also have some in France and Spain.
SherpaReport: What are some of the amenities you offer to the fractional buyer?
Mr. Kaddoura: There are many amenity services also - airport pick-up, concierge, stocking the refrigerator. We can do all the things that essentially a five- star hotel can. Again, we strive to understand the needs and wants of our clients, so they will live in the home of their dreams and have the time of their lives in that home.
SherpaReport: How do you see Fractal evolving over the next few years?
Mr. Abou Bechara: We may be dealing with a new asset class – those who are taking advantage of the new work/life balance, those who are moving beyond the Pandemic to find more meaning in being with family and children, and Fractal residences make this all easier.
Just like non-fractional or regular real estate is an asset class, our hope is that the true ownership feature of our product will enable it to be become a ‘mainstream’ asset or natural way of building property wealth, on par with other options.
Mr. Kaddoura: We will have more information on our success, soon. Let us meet again next year at this time, and we will talk further.