Investors will opt for smaller deals to minimise risk, Gilbertson predict

In April, professor Barry Gilbertson retires as a partner specialising in strategic advice on real estate assets at PricewaterhouseCoopers and become a non-executive consultant at Knight Frank. A leading property receiver, Gilbertson (60) was involved in the workout of $15 bn (EUR 10.6 bn) in real estate assets owned and occupied by Lehman Brothers in Europe and the UK following the bank’s collapse.

PropertyEU: What investment trends do you expect to see this year?
Gilbertson: Locally, I believe that investing in prime property in good quality market towns will continue to bring a good return. As ever, location, quality, and the strength of a tenant’s financial covenant will be key drivers. Internationally, I think the trend to invest in global cities will continue, providing they are also linked to both a transparently stable economy and a stable political climate. There is a conundrum, though, because on the one hand a large deal is tempting since the cost of doing one large deal can be much the same as doing one smaller deal, and yet I think we’ll also see smaller deals, as it is about buyers spreading their risk. One big deal may go wrong but is it likely that four smaller deals of the same aggregate value will all go wrong? Another factor is that, at the height of the market, people could borrow 90% loan-to-value (LTV). So, if a property cost £100 mln, they only had to put in £10 mln of equity themselves, enabling them to do more deals for their pot of money. However, now, a good LTV would be about 70%, so on a £100 mln deal, you need to put in £30 mln as the borrower.

The full interview appears in the April edition of PropertyEU Magazine. Click on the link below to subscribe to PropertyEU