A sea change from across the Atlantic?

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North America is leading the way once again, with the exceptional communicator and statesman Barack Obama safely installed in the hot seat for a second term.

Having led (i.e. caused!) the credit crunch, the US is making the most of its relative safe haven advantage and utilising the depth and diversity of its funding markets to great effect. This in turn has provided good real estate investors with more funding options through corporate bond issuances, plus loans from insurance companies as well as banks. DTZ boldly stated last autumn that, as a result, there was no funding gap in the US. In consequence, acquisitive US Private Equity funds such as Blackstone have begun mopping up bargains all over the world. Over the last year, domestic unemployment has decreased from 8.3% in January to 7.7%, homebuilder sentiment has risen to its highest level since 2006, and prices are up by about 17%.

Just as significantly, DTZ also said they expected the UK’s real estate funding gap to be all but eliminated by 2014, with equivalent funding lines to those active in the US recently tested and expected to expand significantly in the months ahead.

In the Eurozone, meanwhile, DTZ expect the funding gap to remain outstanding for some years. Even so, it looks promising that the crisis is taking a course “less bad” than most had expected  -much to the credit of (ex-Goldman Sachs) Mario Draghi, President of the European Central Bank and FT Person of the Year 2012. Draghi’s promise to “do whatever it takes” seems to be working.

As a result, the recovery of Greek Bonds has proven to be the hedge fund play of 2012. And if the Spanish government finally requested a Euro bailout, the country’s banks only required half the expected £100bn. The great exception of course is France, where policy makers seem to be doing their utmost to dismantle the economy (to the benefit of London). Economic disaster looks increasingly likely as wealth creators jump ship before they are pushed or even have their ships confiscated (as with Arcelor Mittal)!

Returning to the outlook for the UK, Mike Carney (notably also ex-Goldman Sachs) has been recruited as the new Governor of the Bank of England. He is widely considered to be one of the top two central bankers in the world, which is quite a coup for George Osbourne. Carney is generally expected to promote higher growth and employment, with interest rates staying lower for longer at the price of higher inflation.

This should be good news for investors like Inspired who concentrate on “real assets”, as values and incomes increase while debt as a proportion of value diminishes.

It is likely to encourage greater risk taking by investors who need to find higher returns in order to protect their capital, which will be at greater risk of erosion from inflation – currently standing at 2.7% and remaining stubbornly above the 2% target. Again, this represents good news for opportunistic investors like us: competition for assets may make it harder to buy cheaply, but there should still be plenty to go around as the US funds that bought loans in 2012 take action and make their margin by offloading in 2013. Additionally, our existing assets are all located in Inner London and should benefit from an increase in value, while capital should become easier and cheaper to raise.

I firmly believe that more risk taking (within reason) is a good thing generally: fear has a corrosive rippling effect through morale and into trust, investment and employment and has in itself become the greatest threat to our future wellbeing and prosperity. A more confident approach, as we’re beginning to see in the US, may just offer the perfect antidote.

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Smiles all around

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Star JP Morgan real estate analyst Harm Meijer and his team recently published their 2013 forecasts – and they made for very encouraging reading.

The key message underlined the strong capital flows into markets and the belief that we are entering bubble territory for prime real estate in core Western European countries, which will prompt investors to move up the risk curve and invest in secondary assets.
Experienced management teams will be able to raise capital cheaply. To illustrate the point, almost 90% of listed property management teams (as surveyed by JP Morgan) expect capital raisings in the sector over the coming months.

The report also specifically highlighted London in stating:

“The ‘London is booming theme’ will carry on next year and we expect John Burns, CEO of Derwent London, to say at our conference in January again: ‘I can’t say it is bad, when it is good’.”

Shaftesbury too recently affirmed that London is more vibrant than ever.

“And we agree with that. The interest rate for London itself is too low. Valuations will rise further, but we believe there will be more talk about property values, after those have further surprised on the upside, and the coming residential boom in 2013.”

That sounds good to me and we share the sentiment.

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Inspired is delighted to have acquired 19 sites during 2012. These will ultimately produce some 84 units of mostly residential accommodation in Inner London (typically Zone 2) locations and will be worth a total in excess of £20m on completion, with margins on cost typically exceeding 50% and in some cases even 100%+.

Such impressive returns are the result of a bold contrarian approach in a nervous market, not to mention an awful lot of very hard work. We couldn’t have achieved it all without the help of the people we have had the privilege of working with over the past year including friends, family, investors, lenders, professional advisers, and our Inspired team.

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Our objective has always been to establish an efficient business in which we and all our stakeholders would benefit. 2012 was the year we could truly say we succeeded in that aim.

I have absolutely no doubt that we will do even better this year and look forward to working both harder and smarter to achieve the best possible results. After all, it’s not really work when you’re having so much fun, is it?!

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 – !

Learning to walk again

My new ‘social’ life: Learning to walk again

By Martin Skinner

In many ways I now see myself as having started my life over again in 2009.  I’ve always been a fortunate soul and believe I’m lucky to have a ‘glass half full’ attitude.  Even so, my last ‘life’ concluded painfully after a glorious period I think I’ll call my roaring 20’s.

Magda & I testing the Gumpert Apollo with Roland Gumpert

Magda, I & Gumpert Apollo

My last life

A Nice Group team meeting

A Nice Group team meeting

With a background in technology, I deserted the world of direct employment in 2003 to embark upon an unforgettable entrepreneurial property adventure.  For seven years I worked hard to build up the ‘Nice’ brand. It began with my own property portfolio followed by a property services group (run together with my partners Paul and Guy) before eventually hitting the heady heights of joint venturing with big City fund managers.  It was a fantastic journey and I met and learned from a great deal of amazingly intelligent people.

Example Nice Room Bedroom

Example Nice Room Bedroom

Lettings cars

Lettings cars

Tenants' welcome pack

Tenants' welcome pack

In Nice Group my partners, friends and I had built up a substantial enterprise with a magical atmosphere. Our staff actually wanted to come to work, bold plans were made for creating a new asset class for affordable young professional accommodation – and there was much, much, more to come… until disaster struck in the form of the credit crunch.  After a gruelling period of redundancies through 2008 we were effectively wiped out in March 2009 when our financing was pulled with just 24 hours notice.  Worse still, we were due to hit profitability again that month so heartbreaking stuff.  The following months were not the happiest of times and I don’t dwell too much on them. These things happen, so learn from them and move on. So without further ado I’ll move on to my new life …


My new ‘social’ life

I never considered looking for a traditional 9-5 job. I’d got a taste for building up a business and I wanted more.  So I threw myself into helping a couple of friends plan a new business.  Pledging to revolutionise the way fund managers treat their partners and their customers, the concept for Inspired Asset Management was born.  Simon Hussey is the financial services expert and Alistair Britton covers the legal, financial & private equity fund raising bases – and they’re both brilliant to work with.  I look after the branding and marketing, with help from a group of exceptionally talented friends and contractors.

Now I’ve always been a pretty hardcore networker. I love meeting new people and connecting them up with people that can help them – and London is a great place for it. But apart from signing up to a few sites and occasionally chatting to people on Facebook,  I hadn’t really followed what was happening in the world of social networking/media.  I was too busy running my businesses.

But now I suddenly had the chance to immerse myself in an online world where you can meet, connect to and build relationships with pretty much anyone and everyone. Soon I began developing a strategy for Inspired to develop, market and support products through social media.  And it led me to one of the first people to come up with the concept of search engine marketing – David White of Weboptimiser.  His webinar about Twitter got me interested in an application that I had previously thought to be purely for pointless ‘celeb’ chat/following.  David has provided superb and effective online marketing advice ever since – although my genius copywriter Mark will never forgive him for his grammar.  I’ll be forever grateful to David for getting me started and keeping me on the right track.

Around the same time, I met a remarkably helpful American gentleman by the name of John Corey, who appeared to spend his whole time helping property investors, including me, to invest better.  For the [second] life of me, I couldn’t figure out why he would be so generous without trying to sell me something, charging any money or even asking for a role with Inspired.  I later discovered he attracted a considerable following both online and offline – and suddenly everything made sense.  John is a true gentleman as I’m sure those who know him fully appreciate.

Burning Man

By this time it was August 2009 and a long-since-booked first pilgrimage to an event called Burning Man beckoned. I say ‘first’ because it was such an astonishing experience I can’t for a moment imagine it’ll be the last. And I say ‘pilgrimage’ because it provides so much meaning for so many of the people who attend.  Burning Man is a collaborative social experiment that’s been running for nearly 25 years, yet is almost impossible to describe because of its sheer magnitude. Instead, I’ll let you try and make sense of a list of random facts, figures and rumours:

  • Started on Baker Beach in San Francisco in 1986.
  • 4th largest city in Nevada for one week then vanishes without a trace
  • “The Man is a wooden monument to nothing specific, in the middle of nowhere” – The Burning Book
  • Highest concentration of billionaires in the world for one week
  • 50,000+ people, survival conditions, middle of the desert
  • Mix of Mad Max, Hunter S Thompson and The Grateful Dead for all ages
  • Astonishing celebration and spectacle of endurance, art, music, comedy, spirituality etc
  • Pure gift economy

In my opinion, Burning Man has a lot in common with social media – particularly with its gift economy. I doubt that it’s a coincidence that Burning Man takes place so close to San Francisco and is frequented by so many movers and shakers from there.  It’s a seriously, fabulously crazy place and an experience that will inevitably affect my future endeavours. If nothing else, it’ll make any events I help to organise a lot more fun.


Back to reality and a ‘bump’

Big Little Baby

Big Little Baby

Wow, the unsung heroine and love of my life, my gorgeous and incredibly supportive fiancé Magdalena is pregnant.  Magda’s indomitable strength and determination have never ceased to amaze me. Combined with my insatiable entrepreneuring, I can’t wait to see what kind of little maniac our offspring turns out to be.  It does up the ante though and will require us to put new foundations down and establish a replacement income pretty quickly.

Both our mums have been superstars.  They’ve helped us financially and emotionally throughout and will be there to help us when the baby arrives.

Adapting fast

I think it’s fairly safe to say that social media is going to accelerate the rate of progress and dramatically change the worlds of education, work and leisure over the next few years.  The way information now flows around the web in real time allows people to learn faster and more collaboratively, so much so that working practices will inevitably have to adapt and evolve.

While investigating opportunities for promoting the first Inspired property fund to financial advisors, I came across Philip Calvert who runs IFALife.com – a very successful social network for financial advisors.  Phil kindly agreed to speak about social media at our launch event in October.  He also recommended Penny Power’s book Know Me Like Me Follow Me.

Penny’s book is a great read and provides a rare heartfelt view into a world of individual capitalists competing on almost equal footing with the big corporates and building their own personal brands.  The stories she tells about learning from her children also give great insights into where the original demand for social networking sites first came from.  After reading the book it only seemed right to join their online social business network Ecademy.com – another superb find that deserves much praise for its innovation and emphasis on sharing knowledge and skills.

Nick Tadd and his wife Vanessa Warwick provide an excellent example of entrepreneurs embracing successful new ways of working in this brave new world.  They’ve founded and encouraged a number of new enterprises and online/offline communities.  They’ve dedicated their property and social media activities to honest sharing and mutual benefit.  In fact, I paid for a days’ coaching with Nick and it was probably been the best investment I’ve ever made.  Even Tim Watts, or the ‘man from the Pru’ as I like to call him because of his natural aversion to technology, was convinced and went away to buy books on blogging.

Tim has joined Inspired after running the largest listed residential property company in the UK and he’s an icon in the industry. It was a real coup to get him onboard, and for me, the first sign that our efforts to brand the business well and create new working practices are starting to pay off.  Coming just at the point where I succumbed to personal bankruptcy, Tim’s arrival couldn’t have been better timed: a vote of confidence that provided me with a much needed dose of fresh inspiration.

The supremely educational meeting with Nick Tadd led to my joining the 4Walls and Property Tribes social networks. I also upgraded my Ecademy membership to Blackstar status and subsequently met some great characters including William Buist, Judith Germain and Clare Gilbanks.  A more supportive group of people would be very hard to find.

Most recently I had the pleasure of joining 10 other social media devotees on a two-day retreat with Thomas Power in Surrey.  Thomas taught us how to clearly express our key personal values and then link them up with our contacts across a variety of different networks.  A rare group of great human beings – I hope to stay in contact with them for a long time.

Learning to walk again

It’s been a remarkable journey so far and I’ve had the pleasure of meeting an incredibly rich and diverse mix of new people, many of whom I haven’t yet mentioned. I’ll make up for this in future blogs.

Yes, I’m still an entrepreneur. Yes, I’m still a residential property investment specialist. But today, sitting here right now, I’m also a social media evangelist.

So how does it all combine? Well, the Inspired Urban Share fund has achieved its first close and can now start buying properties.  We’re working to develop an investment community with financialtribes.com – many thanks to Nick Tadd for the name, and to Jamie Steele who was at the social media retreat and is building the platform for me.  I have some exciting ideas to develop on it including a contribution currency and a decision market.  And our launch event went well with another planned for the 11th February.

In keeping with the gift economy leanings of the social media universe, the Inspired launch event was an educational and entertaining affair.  PowerPoint presentations were banned and we didn’t overtly promote our products.  It went brilliantly and caused a real stir with our audience – and it was great fun too.  Good connections were made all round in the bar and I’m hoping it will be the first in a long line of future events, attracting more and more investors and advisors to our cause.

What I do find slightly bizarre at the moment is finding myself introduced to senior investment and property professionals as a social media expert – a title certainly not yet deserved, but one that demonstrates that opportunity awaits anyone prepared to adapt quickly and incorporate social media into their business and social lives.

So when it comes to reinventing myself I think I can say so far, so good. But I’m not calling it a comeback … not just yet.

Some key messages on social media from my journey so far:

  • “The biggest shift since the industrial revolution” – Erik Qualman
  • “The group gets better together” – Clay Shirky
  • “You should focus on creating a web of findability” – Nick Tadd
  • “Be random, open & supportive” – Penny & Thomas Power
  • “Serendipity occurs more often in a collaborative environment and more frequently the larger the breadth and depth of your social network” – Penny & Thomas Power
  • “Given the right conditions and the right problems, a decision market’s fundamental characteristics – diversity, independence, and decentralisation – are guaranteed to make for good group decisions.  And because such markets represent a relatively simple and quick means of transforming many diverse opinions into a single collective judgement, they have the chance to improve dramatically the way organisations make decisions and think about the future.” James Surowiecki
  • And most importantly “It is not the strongest of the species that survive, nor the most intelligent, but the most responsive to change” – Charles Darwin

Mortgage lending rates increased – are they taking the …. ?

By Martin Skinner

Yesterday’s Sunday Times money section details a number of margin increases on mortgages by UK banks; mostly the government backed ones.  Cheltenham & Gloucester (Lloyds owned) has increased its tracker rate for its 90% LTV product to 5.49% over base – 5.99% at present.

I’m an interest rate ‘dove’ meaning I believe interest rates will remain low for at least a couple of years.  This is despite a substantial increase in inflation that’s due around the time the VAT rate returns to 17.5% in January.  And despite my belief that a drop in house prices (a ‘double-dip’) is unlikely next year and my expectation that economic growth is likely to surprise on the upside. 

5.49% over base for a mortgage though?!  That should really come with a public safety warning notice.  When base interest rates do finally return to their ‘normal’ position after this crisis has passed of around 5% that would leave borrowers paying 10.49%.  More if rates have to be increased further in order to slow the economy again.

With such limited competition out there for lending still borrowers need to take extra care when arranging their loans.  With such huge margins the banks will inevitably be declaring big profits soon and competitors will enter the market – in turn improving the offering for borrowers again.

Surely sticking with much lower margin mortgages has to be the way forward for now even if it means putting down larger deposits?  Then negotiate bigger mortgages on fixed rates in a few years time when competition returns and future interest rate rises are more likely.

Additionally here’s my roundup of the best of the recent news:

Latest Updates

Hi all,

To minimise duplication for the next few weeks at least I will be posting my updates on www.inspiredassets.co.uk/blog.  I hope you like this new site & continue to follow my updates.

Thanks for reading !

Best,

🙂 Martin