What’s better than an Xmas card?

Yesterday morning I woke up excited by an idea.

I’ve been feeling guilty about not sending out an Xmas card to all my contacts. I didn’t send one this year because:

  • I’ve been busy/lazy and didn’t get around to it
  • Everyone else does that and at heart I’m a bit of a contrarian
  • When I receive a card I tend to reciprocate, say thanks & then … nothing
  • I thought I’d eventually come up with a better idea …

And so today I finally had an idea. You tell me if it was a good idea or not.

Instead of sending a card out that everyone’s likely to forget about or leave at just that I thought I’d send an invitation out to join an online community (Property Tribes) that:

  • They would really benefit from
  • Would benefit from their contribution
  • Is run by two people that have really helped me out this year (Nick & Vanessa)
  • Is occupied by many other hugely creative & supportive individuals (including John Corey)

I’m hugely passionate about property investment. It’s changed my life for the better in so many ways – however it also brings many challenges with it. In my humble opinion (and some of Darwins words) the art to surviving and thriving is to evolve quickly. To do so social creatures like us need help from others and I can see this group forming very effectively around it’s founding principles (and principals) and would like to encourage it. Remember the keys to a wise crowd (according to the brilliant James Surowiecki) are diversity, independence and decentralization – all of which I see in abundance in this forum.

If you think this was a good idea then perhaps you might like to consider inviting your contacts to join as well (you can just export your contacts into CSV format from outlook and invite them through the ‘invite’ page)? It also brings the added benefit of consolidating your valued contacts in a location in which you spend your time.

For all those who are already members of this forum my alternative to a [late] Xmas card is my short list of the best books I’ve read in 2009:

Understanding online social networking has been one of my top priorities this year – it would be the clear winner but it’s been a year of priorities this year and has had to compete with engagement, a baby and numerous financial challenges. For those of you that aren’t there yet (and believe me I’m not all the way there yet either) the books above should set you on the right track.

I believe next year (2010) will be the year we start to really get to grips with really harnessing the power of online co-operation. Now that’s really exciting !

An unfortunate update in the last day – Nick’s mum sadly passed away last night – even more reason to help me to help him to build up his property investment community.  Why not invite your property friends to also join Property Tribes and contribute to the site?
🙂 Martin
www.twitter.com/martinskinner – if you follow me I’ll follow you back.

p.s. Thomas Power (Ecademy) deserves the ultimate credit as the source of this idea. It was at his retreat earlier this year that he advocated migrating contacts into destination sites.

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Santa Claus – will he deliver in 2010?

By Martin Skinner

While researching and considering this blog I’ve been travelling to Poland with my family for Xmas.  My family consists of my fiancé Magdalena (and bump), my mum Heather, mum’s partner Bruce and myself.  We’ve just flown into a snow covered Poznan for our first Xmas in Poland with Magda’s family and my mind has naturally drifted towards Christmassy thoughts.

Santa dropping by
Santa dropping by

Like so many families around the world we’ve had a very tough year.  With such hard times so fresh in our memories and with such uncertainty ahead important questions are begging for answers.  Will the families get on well and have a great Xmas?  Will we have a better year next year?  And does Santa Claus really exist?

Clearly these are big questions and the answers will depend on your own beliefs and circumstances.  I’ll let you know how we get on in future blogs.  For now I’ll share a few of my beliefs and relate them to my specialist subject of investment and specifically investment in London Residential Property.

1. Fog is inevitable

I’ve had the good fortune to spend valuable time with some extraordinary leaders in both finance and property.  One great snippet I heard from a hedge fund manager once was ‘the world is full of fog; I’ve developed the vision to see beyond the fog’.

Fog
Fog

In reality even his vision couldn’t prepare him for the events of the last 2 years.  Despite this I do believe it’s important to come to terms with the fog and uncertainty we are suddenly so acutely aware of – and carry on with our lives.  Psychologically it’s probably the most important step we can all take on the road to recovery.

An uncertain environment offers great opportunities particularly when broadly recovering.  In this environment Inspired Asset Management (an investment business I advise) is fortunate to be fresh, new and without the legacy issues that will continue to hamper many of its competitors for years to come.  The first fund Inspired is advising on will be buying throughout 2010 and deals are likely to be considerably better than if future price rises were “assured”.

2. Fundamentals matter

Now more than ever when investing it helps to:

  • deliver products and services people need or want
  • target undersupplied markets
  • focus on very specific known locations
  • buy very selectively – ‘Alpha’ is a word used in financial circles to describe this approach to cherry picking assets
  • generate plenty of surplus cash flow

We received confirmation just yesterday that the first fund we’ve helped to raise with Inspired has achieved its first close and will be able to make the first purchases – a great way to start Christmas !

3. Think long term

Short-term sentiment matters (perception is often reality) however good assets and businesses if they are well funded and in demand will generally normalise over time.  If they can be “farmed” effectively to generate plenty of cash flow they should do well without suffering from the risks inherent in short-term speculation.

Property in particular is an illiquid asset class and should generally be approached accordingly.  Five years should really be the minimum period to plan to hold an investment – of course if someone offers to buy at a huge premium then early sales should be considered.

London
London

Instead of always trying to second guess short-term movements in markets and assets I believe it’s sensible to look at where supply and demand forecasts are likely to leave gaps in the medium term and seek to fill one of those gaps.

Inspired’s partner Urban Share for example achieves 95%+ occupancy rates and generates 9%+ rental yields on residential properties in Central London and with population growth forecast to continue apace while construction supply is likely to take five years or more to recover we see a gap.

4. Luck favours the bold

Putting time in to research and test your market thoroughly is generally time very well spent and I’m a firm believer in planning to succeed.  It’s important to also bear in mind that you also have to be in it to win it.  Many procrastinate from the sidelines while most others choose to follow the herd (too late).

Those with the guts to drive forward into the fog with their headlights on will often attract others to their cause as they prove their concept.  At Inspired we hope a real passion for Social Media/Networking, collaborating and engaging with our clients & peers along with establishing a successful investment track record will help us to achieve this.

5. Network and make yourself available

We’ve embraced social networking and have made ourselves available through sites like Twitter, LinkedIn, WordPress, Ecademy, Facebook and YouTube and encourage others to do the same.

In the finance & property sectors leaders like Philip Calvert (IFA Life), Robert Gardner (Mallow Street & Redington), JC Goldstein (CREOpoint), Nick Tadd & Vanessa Warwick (Property Tribes and 4 Walls & a Ceiling) and Jaime Steele (North Financial) are true visionaries and if you don’t follow them or participate in their networks yet (10,000+ contacts) I highly recommend you do.

Doors have already begun to open for us and we’ve met some extremely innovative and passionate individuals and groups.  If you would like to know more about us or can add value to our network perhaps come along to one of our networking events.  Our next one is on the 11th February in Mayfair and tickets are just £49.95 each.  Drinks sponsors are also welcomed.

Doors Opening
Doors Opening

And finally please have a very Merry Xmas and a Happy New Year

I suspect I’m not the only one pondering these subjects and while I have initially shared my thoughts with you I would be extremely keen to hear what you think too – please feel free to comment or indeed describe your own Xmas [belief/wish] list.

Now back to the festivities and the family.

Martin & Magda Merry Xmas !
Merry Xmas from Martin, Magda, Inspired & Stepnowski – !

Bad, but this year could have been a lot worse

This article from the Sunday Times summed up the year very well.  Some of my take-outs were:

  • Deflation averted – good news
  • Temporary inflation boost over Xmas & in the New Year – better than deflation
  • Global growth estimated at 3% in 2010 by the IMF
  • V-shaped recovery likely

By David Smith

We have all lived through a remarkable time. As we approach the end of 2009, we are also preparing to say goodbye to a year that will go down as the worst for the global economy and world trade since the second world war.

It has also been, by a margin, the worst year for the UK economy since the Depression. Even if the figures are eventually revised up, as I expect them to be, that record will not be affected. On the Treasury’s estimate of a 4.75% slump in gross domestic product this year, that is more than twice the decline recorded in the previous worst year, 1980.

For the global economy, the International Monetary Fund estimates that world GDP has fallen 1.1% this year. That does not sound much but is the first drop recorded on the IMF’s database, which stretches back to 1970. Before that we had the post-war “golden age” of the 1950s and 1960s.

Advanced economies have seen a GDP fall of 3.4% this year, the IMF says. World trade has slipped before, falling 2.7% in 1975 and 0.9% in 1983, but this year’s fall, 12%, takes us into new territory.

It may seem odd then to say that things could have been a lot worse. Part of my mission is to take the “dismal” out of the dismal science of economics.

The first thing to say is that the worst of the downturn happened quite a long time ago. The period between October 2008 and April 2009 was when global growth, world trade and the UK economy “fell off a cliff”. Economies then stabilised and started on a modest path of recovery. That is true of the world economy and, notwithstanding the official GDP figures, of Britain.

The improved economic tone, and the rise in markets, has happened as we have come out of that sickening dive. Anything could have happened to the banking system, from nationalisation of every bank to the cash machines running out. Instead, as the Bank of England’s financial stability report pointed out on Friday, the banks are a long way from being back to normal but an even worse crisis was averted, for which credit is due to the authorities.

In March, the world was looking at “mark-to-market” financial losses of £24.3 trillion. The recovery in markets has cut that to £6.3 trillion. House prices, expected to fall by up to 25% at the start of the year, will end with a modest rise. Sterling rose over the course of 2009 too.

There is other good news. Last week saw a flurry of concern about inflation, as headline consumer price inflation rose from 1.5% to 1.9% and retail price inflation turned positive (by 0.3%). There will be further rises over the next two to three months, before inflation comes down again.

Why is that good news? The dangers of prolonged deflation were exaggerated but the risk was there and has been averted. Had this crisis been followed by a prolonged period of deflation, comparisons with the 1930s might indeed have been justified. As it is, I would much rather have Britain’s problems than those of Japan.

Best of all is the job market. Employers and employees have shown huge flexibility to get through this recession. Wage freezes, cuts and shorter working weeks mean employment has fallen by only a third of what it was reasonable to expect.

The government deserves a little credit for its labour-market policies, including job and training guarantees. Aggressively expansionary monetary policy and modestly expansionary fiscal policy have helped.

Last week brought news of the first drop in the claimant unemployment count since February last year. The wider Labour Force Survey measure held below 2.5m for the fourth month running, against high-profile predictions of something like armageddon in the job market.

One of the worst labour-market forecasters, interestingly, has been Danny Blanchflower, formerly of the Bank of England’s monetary policy committee, who was appointed to the MPC for his labourmarket expertise.

In January he predicted that unemployment would rise to 3m, or worse, over the following 12 months. In May, even when it was clear from the data that the claimant count was rising much more slowly than expected and that the wider jobless measure could be expected to follow suit, he predicted monthly unemployment rises of 100,000 for the rest of the year. Even as lower numbers came through, he insisted it was the lull before the storm.

It may still be, though it would be an odd recovery that saw job losses accelerate. Unemployment probably has further to rise and will be slow to fall. The Treasury expects the jobless total in 2014 to be some 50% above its pre-recession level.

Only if there is a “double-dip” in the economy, however, would you expect a big unemployment surge. The job-market numbers suggest the economy has been recovering for some months. The risk of that recovery running into a roadblock will be one of the key issues for next year.

There will be more to be said on this but let me just leave you with a couple of quick observations. We are clearly not yet out of the woods. The Bank, in its report, noted renewed worries about the vulnerability of the financial system to sovereign risk, because of Dubai and Greece. Many high-deficit countries, including the UK, have yet to announce the “credible fiscal consolidation plans” the Bank thinks necessary.

The banking system has to wean itself off emergency financial support and needs to get on with it. The Old Lady has taken the banks to her bosom but wants them to stand on their own two feet.

Banks should be doing more to help themselves. By reducing pay bills by 10% and cutting dividend payments by a third, they could rebuild capital by £70 billion over five years. They face big challenges, of big losses on commercial property and rolling over funding in the markets, though the Bank sees these as bumps in the road rather than roadblocks.

The debate about whether banks are lending enough to businesses — or whether the demand for loans has just shrunk — will continue. The return to normal interest rates (which the Bank thinks is 5%) will pose problems, though it will not happen over the next 12 months.

Having said all this, it is very difficult for Britain not to have a recovery if the world economy is growing. The UK is an open economy and 3% global growth next year, which is what the IMF expects, will lift Britain. Most recoveries are V-shaped and the strong likelihood is that this one will be, though there are any number of alternative shapes, including W, square root and saxophone, to debate.

But as we look forward to those debates and say farewell to a fascinating year, probably never to be repeated, we can breathe a sigh of relief that it was not even worse.

PS: We may be getting close to wrapping up 2009 but the excitement is not yet over. Next week will be my annual forecasting league table, which will make some people’s Christmases and ruin a few others. This year’s competition, as much a part of the seasonal ritual as mulled wine or carols from King’s, has an added twist. Readers were invited to submit their own forecasts and some will have done well in comparison with the professionals. There will be prizes.

We are in an online age but the forecasting league table is best viewed on good old-fashioned newsprint. So make sure to get a copy of the paper, even if it means trudging through shoulder-high snowdrifts. Until then, I offer you my best wishes for Christmas. (David Smith, The Sunday Times) http://business.timesonline.co.uk/tol/business/columnists/article6962721.ece

Student Accommodation Comes of Age (Property Week)

By Doug Morrison

Property Week and Unite’s student accommodation conference highlights supply-demand imbalance

Last month Unite Group, the UK’s biggest developer and manager of student accommodation, raised £21.5m from the sale and leaseback of a 395-bed block in Bristol to M&G Secured Property Income Fund.

The sale price reflected a net initial yield of 6.07%. It also reflected the growing institutional interest in student accommodation as an asset class in its own right and not just the preserve of specialist investors.

Just two months earlier, a 6.75% net initial yield was achieved in Bournemouth when another mainstream fund, Aberdeen Property Investors, paid Cordea Savills Student Hall Fund £20.1m for a 519-room block, as revealed by Property Week (residential, 04.09.09).

This rapid yield shift in student accommodation has caused a stir in investor circles and partly explains the bumper turnout last month in London for Property Week’s second annual student accommodation conference, hosted with Unite.

As Knight Frank partner James Pullan told the 350 delegates — three times last year’s attendance — investment in the sector has reached “critical momentum” following M&G’s Bristol buy.

Much of the investor appetite comes down to supply and demand. Student numbers are growing against a shortage of accommodation — and the purpose-built halls can be a selling point as academically similar universities compete for the first-year intake and cash-rich overseas students in particular.

Pullan said the imbalance has resulted in near 100% occupancies and average rental growth of 5% a year over the last six years, compared with 0.6% in commercial property.

“A block 200 metres in the wrong direction can be a non-starter”

Dennis Hopper, Leeds University

Rental growth has topped 10% for 2009 in some towns, although Pullan echoed a widespread conference sentiment that this is unsustainable.

A slowdown in rental growth — 3%-5% was the consensus for the coming year — suggests a pause for breath as the market matures and tough economic conditions force students — or their parents — to seek value for money.

Pullan also referred to the “indigestion” endured by cities such as Sheffield, where 3,254 student rooms were completed in one year alone.

Even in Leeds, which is popular with investors and students alike, there are pockets of oversupply.

Dennis Hopper, Leeds University’s facilities management director, told delegates how a block “200 metres in the wrong direction” can be a non-starter for 80% of students who want to live on or near campus. “It’s that sensitive,” he said.

Just like other property sectors, it seems, location counts for everything with the tenants. (Doug Morrison, Property Week) http://www.propertyweek.com/story.asp?sectioncode=530&storycode=3155090

Degree of certainty persuades property to get into beds with students

By James Whitmore

Students are responsible for the most recession-proof property sector.

The tallest tower in London’s financial district, rental growth of 5% a year for the last six years and a conference that this year was more than double the size of last year’s all relate to the fast-emerging student accommodation sector.

While every Tom, Dick and Harry is scrambling around trying to persuade institutions to part with their money, Unite Group, the UK’s only listed student accommodation provider, announced its UK student accommodation fund was in the final stages of raising £150m of new equity for the expansion of its portfolio. The new units will be sold at a 6.7% premium — yes, premium — to the fund’s 30 September net asset value.

The fundraising was oversubscribed and, while existing investors put £60m in the fund, £90m came from new ones.

The attraction is what all investors are clamouring for at this point in the property cycle: secure income. The fund provides a net 7% income return on its NAV, which is very compelling. Add to that the very likely prospect of rental growth — Unite has actually achieved 9% growth in the last two years but expects 3%-5%in future — and annual returns should exceed 10%.

High grades

Any thought that the fund’s income could fall should be dismissed. The occupancy level of the fund has always been in the high 90% area — it is currently 98% — and shows no sign of falling. As Blackstone director Stuart Grant, who oversees the private equity firm’s student accommodation business Nido, told Bloomberg this week: “There is a chronic imbalance between supply and demand in this sector.”

Property Week’s Student Accommodation conference, held last week in association with Unite, attracted 328 delegates. Senior figures from the likes of Blackstone, British Land, Heron and the Royal Bank of Scotland were in attendance.

Knight Frank’s student accommodation expert, James Pullan, discussed his firm’s latest Student Property Review, which shows that:

  • Rental growth remains robust, recording growth of 5% a year over the last six years, compared with 0.6% for commercial property.
  • Demand for university places continues to rise.
  • The total number of people in higher education has grown from 1.8 million in 1996/97 to almost 2.4 million in the academic year 2009/10 — an annual growth rate of more than 2.5%.
  • As an asset class, the student accommodation sector is maturing and becoming recognised as an important element of the wider property investment market.

On the eastern edge of the City of London, meanwhile, Nido Spitalfields, Blackstone’s second student hall in London, is rising fast and is expected to open in the middle of next year. The 33-storey building will have space for 1,204 students, paying as much as £300 a week for an en suite room. It will overlook Broadgate, the office complex that is half-owned by Blackstone.

Blackstone entered the student accommodation market four years ago and has so far invested more than £400m.

Its first project was a pair of 16-storey towers at King’s Cross that were completed in 2007. Most rooms at Nido King’s Cross cost £245-£270 a week, and around 80% of them are occupied by foreign students, notably from America and China.

Blackstone plans to build a third student hall next year on a site close to Notting Hill in west London. The building’s 272 rooms will be available from 2011. Outside the UK it has bought a site in Barcelona and is looking at others in Paris, Sydney and Singapore.

Within three years Blackstone will probably sell the Nido business, which could take the form of a flotation to create a REIT, joining Unite.

It would be no surprise if British Land’s new senior triumvirate of Jean-Marc Vandevivere, Steve Smith and Charles Maudsley take an interest in the sector, especially given their relationship with Blackstone with whom they jointly own Broadgate. (James Whitmore, Property Week) http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3154535

Logo & pie charts for free …

Click here to read a very amusing PDF email exhange called “For Free“.

Thanks to Joseph for circulating it.

Rally Fighter car built tweet by tweet

By Martin Skinner

I noticed this amazing car and fascinating story in the Sunday Times the other day and thought I’d share it with you. The off-roader built tweet by tweet.

It highlights the momentum that crowd sourcing is building up, and suggests it is likely to be much more broadly adopted in the years ahead.

A company called Local Motors in the US has built a car they’ve called the Rally Fighter using open source production techniques. This basically means fans/members of their website have submitted their ideas by email or twitter for every aspect of the car.

Harnessing the wisdom of crowds like this not only helps companies/entrepreneurs provide better products and services but it also guarantees sales. If the customer has invested their time/ideas throughout the development process they are far more likely to buy the end product – there are many reasons for this one of them is because emotionally accepting a loss (writing off any investment) is twice as hard to do as cashing in a profit.

I’ve also recently come across (random connection through Twitter) a superb financial services company called Redington who are doing things very differently (better) and among other things (including Mallow Street) using technology to tune their presentations on-the-fly depending on the active preferences of their audience.

The skill appears to be in the facilitation of open source brainstorming and/or the aggregation of these ideas. At Inspired we’re looking to develop an online/offline community to help investors and their advisors. Ultimately we’d like it to harness decision markets – where a contribution currency will provide a non-financial incentive and encourage participation. Jaime Steele may have already solved the contribution/karma currency bit for us.

Exciting and innovative times ahead. In my humble opinion social media really is the biggest shift since the industrial revolution and the pace of progress will clearly accelerate in the years ahead.

What do you think will be be the most exciting developments in 2010?

🙂 Martin