26.01.2016

When crisis brings opportunities in the real estate sector

by Keller Zable

400The economical phase that we are experiencing in the latest years is quite severe, all people is quite aligned to refer to this long period as the “Crisis”, the negative trend hitting the world economy since 2008 and, with different severity and short-term countertrends, lasting until today.
In this scenario, almost all forms of investment are evidencing negative performances, such as stocks, bonds, metals, etc…

Real Estate has been impacted as well, with a general decrease of real estate market prices in the EuroZone…
The economic cycle and the related reductions in consumption and living expenses, including purchase of residential houses for example, had negative impacts on real estate development (building of brand new houses, restructuring, etc.) initiatives, increasing overall risks and delaying investments paybacks.
After saying this, the correct question is: “is Real Estate investments still a true alternative, a safe harbour for investors who have liquidity and want to get a reasonable return avoiding market and “crisis-linked” volatility?”

The answer is “YES”, or better “ABSOLUTELY YES, EVEN MORE THAN IN THE PAST”

How this optimistic view can cope with the negative effects described before that the crisis is generating also on the Real Estate segment?
This view is corroborated by another very important element, surely less visible or maybe unknowable for the private investors…

Due to the crisis, some real estate “products” that were, until 2011, reserved only for institutional investors, are now accessible to the private investors as well… Why?
Again, due to the crisis, real estate deals between institutional investors dramatically decreased thus institutional investors, in order to cope with their real estate sale targets, are open to consider new purchasers for these real estate elite assets class…

Which are the main elements distinguishing the real estate elite products we are talking about?
They are off-market assets, normally with unique top rated tenant, with armored renting contracts (long duration, no break options, double-net coverage, 100% inflaction-linked) and, in most cases, located in city centres.
Last but not least, gross yields can be higher than 7% per year…

400Too easy? Too much to be real?
We can ensure several deals took place in the last three years, involving, much more than in the past, private investors as buyers, using their liquidity for a high-yield alternative investment.

In conclusion, whilst traditional real estate shows more risks than in the past, the high-yield real estate investments represent a tangible alternative, the safe harbour some investors are looking for… How to get access to them? As these assets are “off-market”, visibility is limited and reserved to qualified international advisors…. 

At the same time, institutional alternative investors such as alternative real estate investment funds are buying this kind of high-yield real estate assets and then are offering fund quotes also to private well informed investors, enabling a sort of “indirect” investment in the real estate asset. This “indirect” investment implies no property management for the investor, lower investment entry tickets, risk reduction and, last but not least, more liquidity.

The game is open, real estate advisors, institutional investors and, thanks to the crisis, private investors are the players... don’t wait too much, the game may be over very soon..!  
 


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