Fund managers urged to get over fear of falling

Lease maturity, not loan note maturity, is the signal that fund managers should be watching out for in their search for opportunities in the distressed real estate market, Simon Martin, partner and head of strategy and research at Tristan Capital Partners, told the annual Inrev conference in Vienna last week.

‘The value of undermanaged assets falls dramatically when they are within two years of expiry,’ he pointed out. ‘Buying undermanaged assets from landlords who can’t act is a good way of making money in a flat market. And there is a lot of wood to chop.’

An additional incentive is that negative real returns prevail today and will do so for some time to come, he said. In an environment where the number of funds is set to shrink further, fund managers and investors who failed to act on time would find US funds or other competitors ‘eating their lunch’, he warned. ‘It is easy to become introspective and inactive but we must get over our fear of falling.’

Martin is particularly upbeat about the German market which looks cheap on a currency-adjusted basis, but also pointed to de-levering opportunities in the UK, Spain and Ireland. Investors and fund managers need to keep a close eye on impending 'inflexion points' in these markets before it becomes too late to buy, he advised. At the same time, they need to be prepared for further ‘bumps on the road’ from geo-political factors such as oil prices, the US presidential elections and elections in France, the Netherlands and Greece and ongoing tensions within the European Union as Greek’s debt problems continue to cast a long and persisting shadow.

New regulation is ‘aggressively’ dampening the pace at which opportunities can be exploited, but uncertainty and volatility make the opportunities bigger, he pointed out. ‘Over time we cannot afford to miss the turning points so keep watching!’

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