When people think of real estate investing, their most likely areas of focus is on homes, apartments, or various types of commercial buildings. But Barron’s has run a piece chronicling a very well-performing fund that takes an entirely different approach—investing in property where tenants cannot move, at all. To be clear, this means things like data centers, hydroelectric dams, cellphone towers, and lab space. Large casinos also have this immovable characteristic because of the investment it takes to create them. This type of investing approach has yielded very strong returns over the last few years.
FINSUM: Buying into properties where tenants can’t move creates a very strong defense against economic downturn. This is definitely a good hedge to use against many asset classes and can be achieved using REITs.
One of the bright spots in the post-Crisis era has been the collectibles market. Everything from antique cars to high end art has surged in value since the Crisis, making collectibles one of the better returning asset classes. However, at least for the art market, that appears to have changed, as 2016 saw sales shrink 11% to their lowest point since the recession. 2016’s poor performance follows a down year in 2015 as well, when sales slipped 7%. The combined losses have now wiped out all the gains seen in 2013 and 2014. 2016 was particularly poor for auction houses.
FINSUM: Hard to say exactly what slowed the sector down as it had been doing so well. One interesting factor—the declines directly coincide with the bear market in oil.
The real estate investment industry is having a problem. Investors are very eager to put money to work in the asset class, but managers are having trouble finding suitable investments. At the end of 2012, property funds had $136 bn to invest, now that figure is $237 bn. Low rates have driven interest in the sector, but the issue is that there is simply not much for sale, which means investors have a great deal of dry powder yet to be invested. Owners have easy bank financing and low debt levels, which leave them free to hold onto properties until they can get a higher return later.
FINSUM: As this piece rightly points out, a lot of people are investing for yield and not looking at the fundamentals. The market appears to be getting overheated, at least on the commercial end.
Source: Wall Street Journal
The renewables industry, and especially solar, has just hit a major milestone. For the first time in history, solar energy is now the cheapest form of new electricity generation. It is beating out conventional source like coal and natural gas, but also wind energy. The low cost of solar energy is thanks to years of quick advances in technology which made solar panels much cheaper to buy. In 2010, solar energy cost almost $6m per megawatt, but this year that cost is down to just $1.65m. In some cases, solar energy is now half the price of coal.
FINSUM: Whether or not you are worried about the environment, the advancement of solar energy is good news, because it is lowering energy costs across the board.
This article takes a different view on the Clinton vs Trump contest than most. While many articles focus on how markets will react, this article looks at which president would be better for the real estate market, especially the luxury real estate market. This article did a survey of real estate experts, asking which candidate would be better for the market. The respondents were from all over the world, not just the US, and 83% said Clinton would be a better president for real estate than Trump. The key reason why was stability, with Clinton’s experience giving the property market a sense of calm continuity, while Trump is seen as a “wild card”.
FINSUM: We find this article short on substantive analysis, but it is interesting to hear the opinions of real estate market veterans on how each candidate might affect the asset class.
Source: Mansion Global
Since the Financial Crisis, classic car investing has been very lucrative. Like other niche assets classes such as wine and art, the market for classic cars has surged in the years since the Crisis alongside low rates and soaring wealth amongst the world’s richest. However, the market is starting to change, as demand and prices for all but the most sought after calls starts to drop. All ten of the top ten prices ever paid for classic cars have come since 2013, but even here the market is starting to look like it has peaked. Price gains in the industry’s HAGI Index have been slowing and appraised value of cars has been falling.
FINSUM: This has been a great asset class for those that got involved before 2013, but it looks like the wrong time to be buying into the market.
Source: Wall Street Journal