The backdrop being played across our screens is, frankly, terrible; wars, mass migration and human suffering combined with an uncertain global economic outlook and political instability.
The economic impact of substantially reduced oil prices is causing fiscal pressures for many countries that are dependent on a high oil price to maintain social spending to support their growing populations.
While the global economy is expected to maintain growth, the pace is slowing down, led by events in China. As a consequence, investor sentiment is more fragile, which is reflected in materially lower share indices and outright losses over the last three months.
A general global investor characteristic since the financial crash of 2008 is the ‘hunt for yield’, as many forms of deposit offered by financial institutions lag behind inflation - assuming a return is paid. Many banks are effectively charging depositors, so their wealth, while in safe custody, is diminishing.
90 North works in close partnership with its Gulf-based institutional partners who typically underwrite the equity required for transactions beyond our own co-investment. However, our relationship is typically very different to many other players in the sector. Our equity is ‘tactile’ and very ‘close’ to us. We don’t advise any funds or collective investment schemes that are ‘blind’ or would constitute ‘stand-off’ or discretionary equity. Each transaction we propose stands on its own merits and the co-investment we make ensures that interests are aligned.
Furthermore, our partners know that a broad spectrum of the 90 North team has cash ‘skin in the game’ and, apart from providing team stability, this means we will asset manage to achieve every last penny of income and capital returns.
This partnership approach, combined with our track record of execution and co-investment, has built enduring relationships. Our institutional partners have seen their client networks materially increase, allowing 90 North to have confidence in executing more and larger deals across the geographic spectrum. Accordingly, we have now executed approaching 20 transactions in the UK, the US and Europe in 2015 with a combined purchase price of approximately $1bn (£647m) - the largest transaction being $127m. Most have been structured Islamically.
The demand for transactions we present seems as strong as ever as investors are determined to satisfy their hunt for yield and to diversify internationally, taking advantage of a stronger US dollar.
I believe the emphasis between ‘wants’ and ‘needs’ may have subtly changed. Global uncertainty linked to desire to protect wealth means that investors have a greater need to invest, even in an environment of competition for assets and tighter returns.
The property sector and firms such as 90 North offering compelling opportunities, robust partnership and co-investment on transactions are likely to benefit from continued strong demand for both income-producing and development opportunities. However, investor sentiment and capital markets can change so we are working flat out to meet our clients’ expectations.
Nick Judd is founder and head of investment at 90 North
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