Archive for October, 2008
October 28th, 2008
Today I attended the Abu Dhabi Investment Forum that was held at the Dorchester Hotel in London. Despite all of the current uncertainty in the financial markets the event was attended by over 300 delegates and the room was bursting at the seams!
There were a number of key note speakers and panel debating sessions which reinforced our view that Abu Dhabi has all the ingredients to be a top rate investment opportunity. Some of the key messages to emerge from the day were.
- There is a vision for what Abu Dhabi will become, and short term market sentiment will not detract from this vision. Indeed it is seen as an opportunity to acquire both capital assets and expert human resource which were previously either not easily available or expensive.
- Oil and Gas wealth underpins all future development, but diversification of the economy has already begun. There will be three main drivers, existing oil and gas, new industries and commerce such as aerospace and finally tourism where Abu Dhabi seeks to project itself as the cultural capital of the region
- The property market is a by product of all of the above, it is not a driver of the economy but something that must necessarily follow growth in other areas. The housing shortage is real and accute and is likely to stay this way for the medium term.
We continue to make great strides in with due diligence process on Abu Dhabi and as noted above the event today reinforced our view that Abu Dhabi property should form part of an investors international property portfolio.
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October 27th, 2008
I read with interest in the Sunday Times 26.10.08 that there are “spots where property is still hot”.
In times of crisis investors have typically sought refuge in property. However even though the UK property is plunging, as The Times says “the picture is not the same the World over.” Property in some regions is booming and the Times quotes amongst others Bulgaria, Slovakia, Russia and the Czech Republic. What I find difficult with recommendations such as these is they are based upon historic performance. I don’t know about you but I like to invest in places that are going to grow not that have grown already. If you read any commentator on Bulgaria they are saying that the boom is over and prices are already in decline.
The reason for this is that like many markets, the tourist has been targeted as the primary driver of demand. In times of hardship tourism becomes a discretionary spend. Therefore for property to be a solid long term bet it has to have the fundamentals of commerce and tourism (or leisure pursuits) in place. Within the EU (and the protection that this offers the property investor) there are not many places that have these drivers but Larnaca in Cyprus does. If you want to invest directly in property, have solid capital growth and good demand from commerce (Cyprus has the lowest rate of Corporation Tax in the EU so many companies will relocate ther in the next few years) then I urge you to look closely at Larnaca.
Interestingly the article also suggests that Funds are a better bet than investing directly in property. All I would say is that they are suggesting you rely on a Fund Manager then to look after your interest – look at all those poor individuals who have relied on a Fund Managers to manage their pensions for them over the last couple of years! Take control yourself and own a physical asset.
October 15th, 2008
As many of you will have read already I’m developing a concept of holiday investment homes that are truly accessible for families that are touched somewhere by disability. The concept is that you can go on holiday with the whole family and there will be something for everyone to enjoy on and off site. To look at though one would never be aware that it is an accesible complex.
The project has now been christened Q Well-Being.
The family can use it themselves for some of the year and rent it out when they are not using it. On site will be a top class restaurant, a spa in which to pamper yourself and enjoy hydrotherapy, a totally accessible pool, on site help and lavish grounds to enjoy the year round sun.
Savvas Kakos, CEO of the Quality Group and whose mother has Parkinson’s disease, is to be the developer. He has purchased an excellent plot of land close to all the leisure, health and shopping amenities that Larnaca has to offer. George Antoniou is QG’s excellent head architect and after two days intensive training on the needs of the accessible user (including spending a day using a wheelchair) understands well what his task is in designing the project . So that’s step one completed!
Needless to say the project has attracted a lot of attention for it’s truly unique as a concept. We have now got some really committed individuals on the team. As well as the top accessible kitchen designer in the UK (Adam Thomas) we have also secured the services of David Bonnett as consultant Architect to the project. David is the UK’s leading accessible architect and is responsible for accessiblity in the 2012 Olympic Village in Stratford. Additionally we have Agnes Fletcher on the team to support marketing, PR and communications. Agnes is Europe’s leading light in terms of Disability Equality Training. The core team now needs to be complemented by the addition of a major name to put their seal of approval on the project and we are on to this one as well! A very famous individual is carrying out their due diligence on the project as we speak so I’ll keep you posted on this.
What was a germ of an idea has now blossomed into a full project that’s well underway! We have a project planning meeting in Cyprus this week and another in the UK in early November.
So watch this space…..
October 15th, 2008
We’ve just come back from a week in Dubai and Abu Dhabi coinciding with Cityscape Dubai; a huge property event showcasing UAE property investment opportunities. We wanted to understand the market (especially Abu Dhabi) and investigate property investment opportunities for you, our clients. And what a week it proved to be! It was strange to be 6 hours away in Dubai with so many people walking around with their mobile stuck to their ear saying “What’s the price of RBS? What’s happening with the FTSE and the Dow?†We truly live in a global economy where information spreads rapidly, but watching these tumultuous events unfold from afar also allowed us the benefit of a different perspective.
We were unsure what the sentiment would be back in the UK but in the UAE there was definitely concern but also a feeling that this is a time of huge opportunity. You should rely on fact not sentiment. For the savvy investor who is prepared to make a long term play (12 months +) there is plenty of value in what ever asset class you choose.
We obviously talk to many people about investment and long term financial goals. Naturally people like to have a balanced approach to assets, geography and risk. How ironic then that much of the value that has been wiped from people’s portfolios has been lost from the more traditionally safe investments of holding cash and pensions. Never was the term Due Diligence been more relevant; we even have to check out the strength of a bank before we can deposit less than £50,000 safely!
We believe that it will take many years before equity markets recover sufficiently to get back to their levels of 18 months ago let alone power forward to enable us to have a decent pension in our retirements. If you keep your head this is a fantastic time to rectify the situation, but what is clear is that personal action is key rather than sitting back passively and relying on fund managers (who have repeatedly failed us) to make your situation better. One thing is for sure they will look after themselves first!
You all know that QIS believes property should be a significant proportion of one’s investment portfolio. In times of turmoil investors have historically turned to property as a safe investment. We expect the same to happen again this time. However one thing is for sure you can’t just invest in any property anywhere. Even ill-informed investors can make money in a Bull market but in a Bear market the ill-informed are more likely to lose money. Due diligence is the key, backed with a basic understanding of the demand drivers that sit behind good investment opportunities. Put simply, where supply exceeds demand value exists. This has been relevant to us as we have presented our opportunities in Larnaca, Cyprus over the last few months to many of you This is a great example of an investment opportunity that is backed by solid fundamentals and where there has been and continues to be a regular positive news flow.
The economy is global and so too are property investment opportunities. They are also dynamic and will alter over time. Most of you will be familiar with our 4 stage QIS StEP due diligence model. The first step of this (the country dynamics) is more important than ever (witness the recent events in Iceland). This is what led us to Abu Dhabi many weeks before the events of last week.
We saw enough during our trip to excite us sufficiently to spend the next few weeks deeply examining the market using our QIS StEP approach. If it still excites us at the end of this process we’ll bring the opportunities to you.
Remember we are in truly exciting times!
October 13th, 2008
We have been away in Dubai during the past week and witnessed the tumultuous events in the financial markets from afar and also with the benefit of a different perspective.
Firstly, these are truly historic times that will be taught to our grandchildren, provide many students with the perfect material for their theses, and truly change the way that we take responsibility for our own financial security in the future.
Consider these startling observations:
- Who would have believed that having ‘money in the bank’ would be something to be concerned about!
- Who would have believed that developed world countries could go bankrupt!
- Who would have believed that central banks would be powerless to stop the endemic rot that is gripping financial markets, despite the greatest concerted effort by all the major powers around the world!
- Who would have believed that governments would be forced to nationalise the very pillars of the capitalist marketplace, the banks!
- Of course fear is the greatest driver in these times, and no asset class is left untouched by the carnage, whether good or bad. But as rational investors, we must look at the facts, and see if the underlying circumstances have been altered before we arrive at our own assessment.
In truth supply and demand factors that existed previously have to be reanalysed and reassessed. Let’s take the example of a global commodity oil, that has been very much in the headlines over the last few months:
As we are all aware crude oil prices are approximately 40% lower than the peak reached earlier this year, currently trading at around $85. However it is only two months ago that I read a note from the oil specialist at my stock broking firm that prices could hit $200 per barrel this winter as demand placed huge pressures on the supply chain for oil! Now, of course, this level may still be reached, but it is highly unlikely with the more likely course being a softening of prices as world demand slows down for oil amidst the current recession conditions being faced around the globe. This example throws up two interesting points:
- The so called specialist could have lost me a lot of money. So one must start to question how aware these people are and how much of your money they should be controlling. I have huge sympathy for the current plight these people and their families are in, but many people have expressed the view that if they could not see this coming then what were they actually being paid those huge sums for.
- On a long term basis, the view of the analyst above is probably correct, and if you are a long term investor, then to buy at the current time maybe very profitable in the long run. In fact, I know some major investors who are doing exactly this! It is very difficult to call the bottom of any market, but the supply versus demand curve points to major pressures on supply in the future as demand grows from emerging economies and continued population growth. So a long term investor views the current situation as an opportunity.
So this example highlights not only how any asset class can be affected by the current turmoil, but also how this maybe distorting the long term trend for that class. The truth is, as I have said many times before, that nothing ever moves in straight lines all the time. There are always corrections that set the base level for the next move, and that is where we are now. But the long term investor is not interested in a short term snapshot in isolation, but how to view it from a long term perspective. So we remove fear from the equation and use rational thought to construct a plan for our way ahead.
As a class, property is more secure now than ever, as highlighted by many commentators. However, like all classes, it has been affected by the current conditions and there are some fantastic opportunities that are arising everyday. Now is not the time to go into these opportunities in detail, but location, strength of covenant, and thorough due diligence have never been more important.
Finally, a thought and quote from the greatest private investor ever, Warren Buffett:
‘When all around you are being greedy then be very fearful, but when all around you are being fearful then be very greedy’
As a long term investor, he has followed his words with actions already without trying to predict the bottom of the market – I know I will be doing the same in the near future.