Editor's letter: Forget the rising tide
It’s time for a new game plan. When it comes to operating in today’s real estate markets, simply buying an asset and waiting for it to appreciate isn’t going to bring adequate returns. Investors will tell you that the idea that the rising tide raises all boats is passé. The new accepted wisdom is: if you’re going to the market with the same old strategy, you will fail.
Investors such as GE Real Estate, which are nimble enough to shift gears and buy debt from banks seeking to lighten up their balance sheets, are making the best of tough times. And those able to take a longer-term view on investments and endure a healthy dose of volatility will reap the rewards.
At the moment, cash is king, making investors such as the sovereign wealth funds the primary beneficiaries of this long-lasting low tide. For these players the property market is offering up a wide variety of bargains. They’re picking up distressed assets and using their piles of cash to create opportunities not available to those investors dependent on bank funding and leverage to create returns.
It’s anyone’s guess when then tide will come in. The continuing credit crunch means that it’s tough for developers to raise cash, and persistent concerns about the global economy mean that another round of declining values could be on the cards. For some, that will create further chances to bargain-hunt, but for others it will mean sitting tight and working hard to carve out opportunities where and when possible.