Why London Property Is Now a Good Bet for UHNW Investors

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(News Source: Strategic Real Estate Advisors)

(LONDON, UK) -- Strategic Real Estate Advisors Limited (StratREAL), which provides real estate investment advisory and asset management services to both institutional and rich private investors, says the capital has always been considered one of the top locations for UHNWS and SWFs looking to invest in real estate but in the current environment it is particularly appealing.

There are a number of key reasons why, according to Group Managing Director Jeremy Gates.

London is a mature market with values reflecting the reality of the current crisis. It is also a highly cyclical market so point of entry and asset selection is crucial to optimize performance at disposal.

As the impact of the credit crunch has unfolded over the past 18 months there has been a 30-40 percent fall in real estate values and assets are trading below their long term price average (close to the 1970 and 1990 periods). Properties with good real estate fundamentals (built or re-developed recently) and strong tenants on long leases are available for sale at discount by distressed sellers.

London has seen a sharper than previous downturn but is anticipated to be one of the first markets to recover. History shows that London real estate markets have previously reached the recent highs and more recent lows so performance can be expected to improve in the future. Other key markets did not witness the recent highs hit in the boom to 2007.

The appeal of London to UHNWs and SWFs has also been boosted by the approximately 20 percent fall in the pound against the dollar and euro means that the real cost of prime London assets to overseas investors is significantly lower than for those in the US and Europe.

Additionally London has one of the most transparent real estate markets in the world. With many investors around the world feeling anxious and uncertain about real estate values and the weak economy, transparency is even more important today than it has been in the past. Transparency provides clarity and is essential to being able to manage all the idiosyncrasies of a market.

London has the most international profile for investors and is open for business from all countries increasing the liquidity of the market and is vitally important as the leading global centre of intellectual capital and financing, bridging the Eastern and Western markets.

Given the tightening of credit lines across the market, self-funded investors like UHNWS and SWFS who do not rely on third party debt are currently able to secure buildings at more attractive pricing than those that require bank debt. Vendors do not want to transact with buyers who have no track record, are not professionally advised, have a history of re-trading on transaction terms and cannot perform in an agreed timescale.

The prime market has tightened on pricing. The fall in value of core property has been above all long-term average yields. Yields on core and core-plus buildings have reached levels allowing for a good leverage annual cash-on-cash on standing investments. StratREAL believe investors should be looking at core and core-plus buildings with medium to long-term leases, quality tenants and good prospects for capital growth.

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