Back to were we started off with this blog: March 2009. We’ve set off while the economy was based on quicksand: banks, companies and consumers were suffering alike. Governments too, due to the necessity to bail out and to support the weak. And even countries have been taken to the cleaners. Take Greece and Ireland for example. Real estate markets have suffered substantially and have come down “back to basics“.
After that, the bottom of the market has been called. It took a while since then for prices to adjust to the new reality (after all, you can eat an elephant only bit by bit). And now, it seems dealflow is picking up after summer 2010, it seems like the dog days are over. That said, we should point out that current deals are mainly at institutional-sized volumes and between larger market participants.
Let’s see where current trend takes us. Today is the first day of the Expo Real Property Fair in Munich. We will keep you posted from there.
Many talk about green shoots for some months now. Others say that worse is yet to come. We have seen some recovery in some commercial property markets. Nevertheless, investment transaction stay behind in both volume and yields. It is clear that occupier demand is down, as well as investor’s demand. But, where are we now? Are we out of the woods yet? Vote here.
Just a note on some ‘recent news’: IVG launched a new private fund with EUR 248 M fully subscribed within 6 months. In today’s market, I think that is just a job well done.
Georg Reul, Board member in charge of funds business commented:
“Our placement success shows that private investors are very interested in investing in real estate in Europe, all the more so in financially difficult times. We are convinced that the demand for top-quality property in Europe will continue to grow in future. As a value investment with protection against inflation, real estate is the investment of choice.”
Catching up on some recent news: at the end of Jan 2009, Dutch merchant bank Kempen & Co. announced it will discontinue its property hedge fund.
Does this make sense? Yes and no.
Why would you want to have a hedge fund specialising in property shares in the first place? A hedge fund, by definition, takes short positions in shares as well as long positions. Shorting property shares has become too expensive nowadays. And not only that: why would someone short a stock that provides a dividend yield of 8%? So, yes, it makes sense to stop these operations, cut your losses short and count your blessings.
On the other hand, it doesn’t make so much sense if you feel property is a good investment in the long run and you are able to buy propertyshares at huge discounts. Provided that such fund would have patient investors, sharing your views on property in the long run.
Funds with a long/short strategy should at least follow premium/discount patterns. Short shares that trade at premiums and buy shares that trade at discounts. These hedge fund managers would have found themselves shorting stock at the beginning of 2008 and start buying right about now.
Sure, with knowlegde of hindsight, everyone’s a winner. And my long bias during the better half of 2008 didn’t bring me much, must say.