Marc Wachsberger | Master Investor | September 2018

Marc Wachsberger | Master Investor | September 2018

Major disruptor in the hospitality sector

By Neale Petersen

Marc Wachsberger is the Managing Director of the dynamic Capital Hotel and Apartments group. He is a visionary and entrepreneur at heart.  He is disrupting the traditional age-old hospitality space and conventional hotel industry model. He has built the Capital into a leading supplier at the forefront of the corporate hotel industry. They offer corporate business travellers with high quality affordable accommodation compared to the traditional hotel model of higher priced accommodation with unnecessary services.

Marc studied finance at Wits University and then did a CFA. He first started his career cutting his teeth in corporate finance doing mergers and acquisitions in the mining sector. He then started his own private equity firm called Intamarket Equity and Advisory. The Sandton area in Johannesburg has had its fair share of property bubbles of both under and oversupply of accommodation over the years. Marc spotted the gap for affordable long-term accommodation in Sandton. He subsequently set up Executive Apartment Hotels (EAH) which was later rebranded The Capital to take advantage of the opportunity.

Light-bulb moment

The original idea of The Capital business model was sparked from a building called The Hydro in Rosebank which had 240 apartments a developer was selling. Every buy-to-let investor was looking for an apartment and a tenant. Tenants always need property management services and they saw an opportunity to offer a full solution. They would be the tenant, the property manager (and lease holder) with signed 3 year leases with the owners. The rent money is paid into the investors bank account on the first of the month so they can focus on managing and renting out the hotel apartments at daily rentals averaging around R1500 per day.

Marc says, ‘An investor wanting to get into the buy-to-let property market can be tough and with us you can buy a property with a tenant in place and a guaranteed income yield of 6,5 – 7%.’ The major benefit for investors is a guaranteed, albeit a slightly lower rental return. The Capital would in turn also upgrade the hotel and apartments to their standards and branding. Their current business model is now focused on purchasing, developing and leasing existing properties and already have secured over 290 landlords with leasebacks.

Marc says only two percent of accommodation in South Africa is offered in apartment hotels, while this sector accounts for up to nine percent of the market globally. He says this sector is ripe for growth because business executives travelling for short trips or long stays increasingly prefer apartment hotels as they are more spacious and more cost-effective than traditional hotels. He says local businesses have to import skills as result of the brain drain in South Africa and a huge corporate market has grown out of countries like Germany, India and other European countries who want to  occupy an apartment for a week or two.

They have a tried-and-tested offering that provides the best of apartment living and the best of hotel-level service, while still beating regular hotel prices by an average of 25%. Travellers are always looking for value for money so they cut out all the frills. He says, “with us you get a room, without the frills, a toned-down service and self-catering facilities.”

A big goal in the company is keeping the tenant happy, be profitable and to grow the company with more apartments.

The first deal they secured was when they bought The Empire building from Investec and they used the zoning to their benefit. This was the advent of their first brand The Capital Empire in Sandton, Johannesburg. The idea on existing buildings was to use more bulk and less density which created a need to develop themselves thereafter. The next deal was the Capital on Bath in Rosebank which they developed from scratch. They then expanded to Cape Town then to the Pearls in Durban where they came in as a tenant with 140 apartments.

The Capital Hotels and Apartments, already has 11 apartment-style hotels both operating and in the pipeline across South Africa since it launched in 2008. The latest one The Capital Melrose is scheduled to open in early 2019. Currently they have five properties operating in Johannesburg (Four in Sandton branded The Empire, On The Park, 20 West and Moloko) and one in Rosebank branded On Bath, then three more operating in Menlyn Maine in Pretoria, The Pearls in Umhlanga, Durban and The Mirage in Cape Town. The Capital also targets the conference market at their Sandton and Pretoria venues with state of the art facilities, audio and super-fast internet which are very technology focused on business hotels.

Section 12j of the income tax which venture capital has powered the capital growth for South African funding. They would like to expand nationally targeting shopping centres and look at your unutilized bulk. They have plans to roll out additional hotels and apartments in Polokwane, Bloemfontein and TygerValley in Cape Town.

Marc draws a lot of inspiration from tech businesses such as Airbnb founder and disruptor Brian Chesky. The business is actively managed by the owners. The Wachsberger family share 50% equity with Buffett Investments

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The Capital is one of the largest providers of fully serviced luxury apartments and hotel rooms in the country.

National operation with multiple properties in key locations, including eight apartment hotels in Sandton, Menlyn, Rosebank, Cape Town and Umhlanga
Fastest growing group in South Africa, opening on average two new hotels each year
The only hybrid operator in South Africa, with fully serviced luxury apartments (1 500 + rooms)
Revolutionized the market by offering solutions for short, medium and long-term travellers (including families)
Cost-effective frills-free accommodation tailored to modern business travel needs
Owner-managed with a flat management structure, which means quick decisions, no bureaucracy, and an agile entrepreneurial approach at every level
A disruptive and dynamic brand anchored in breaking hotel norms and fostering entrepreneurial spirit
A proudly South African business (over 500 + employees), focused on identifying opportunities for growth to provide jobs in the future
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