Much ado about something, nothing, everything. Depending on who you talk to, the world is coming to an end and the end is signaled by ___________(fill in the blank with property, food, fuel, etc.). Trying to push forward with initiatives in this climate is difficult business. Especially if you are trying to innovate.
But, probably the worst thing you could do (in any climate) is to full-stop an initiative based on loose macro data and FUD (fear uncertainty and doubt). Yes, its a good time to double check your assumptions and adjust for a scene change.
With respect to property, even the “good” news is myoptic; missing the point.
READ THIS:
Property is ‘good value despite a fall in prices’
By David Ainsworth,
Third Sector,
28 May 2008Investment
in property is a good long-term prospect for charities in spite of big
drops in prices for commercial buildings, according to charity property
fund managers.Managers have reported rental income of up to 7 per cent, even though property values have fallen by more than 15 per cent.
“If
you look at property on a fundamental level, it’s good-to-fair value,
but this is an issue of sentiment,” said Charles Mesquita, manager of
the Charity Property Fund at Rensburg Sheppards Investment Management.
“We’ve seen significant drops in capital values, but income has
remained relatively predictable.”He said in an interview with Third Sector that charities should be investing in the market for the long haul.
“It
is too late to sell,” he said. “Anyone who wants to get out should have
done so a year ago. Most charity trustees are long-term investors and
will be making decisions on a five to 10-year view.”James Thornton, fund director at Mayfair Capital, said he expected new investors to take advantage of a weaker market.
Anyone who invested now might lose some capital value in the short term, he added, but would have a solid income stream.
John
Kelly, head of client investment at CCLA, emphasised that apparent
drops in capital value tended to be unreliable, and were not
necessarily connected to the capacity of a property to generate income.“If
you want a price for BP or Shell, I can look at a computer screen and
tell you,” he said. “But with property, very little is being sold at
the moment, so there’s no accurate way of judging the price.”
What’s missing here? Folks are still emphasizing the inherent capital values to justify investment in property. This is appropriate for only 1% of charities and social enterprises. Specifically those with a substantial property portfolio designed to deliver balance sheet performance (regardless of use). Everyone else should be approaching their property purchase from a usage perspective…asking the following questions to determine if the purchase is right for them.
>>> Will my use of the building further my social mission? and importantly, could this be achieved more efficiently without a building?
>>>Will my envisioned usage create greater value (in monetary terms) than standard evaluations?
Looking beyond the basic capital values, although important for financing and funding, to usage and alignment is the way to make stop/go decision making. Otherwise, you will find yourself trapped in a developer’s investment game scenario, distracting you from the purpose of the purchase.
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