In a mature real estate market like the United Kingdom, opportunities for bargains are rare. London real estate in particular is not synonymous with affordability in any market sector. Even in sectors historically seen as higher-risk, such as logistics, yields have plummeted in recent years. If you want a stable, low-risk income stream there are few better investment opportunities than London, even factoring in the rapidly approaching exit from the European Union.
But where are the opportunities for investors looking for better returns in their real estate portfolio? Regional property is one; whilst build-to-rent, care homes and student accommodation are another lumped together as ‘alternatives’, which in this context means ‘smaller, riskier markets.’
However, there is now another awkwardly named kid on the block – “value-add”. Whilst not a new investment term in general, the struggle for higher yields means investors prize a stake in one of these value-add portfolios.
In essence, this blends traditional real estate sectors – office, retail and industrial – with fundamentals that are perceived as higher risk, such as the age, specification or price. In theory, managers make further canny investments in the asset or portfolio to raise standards, restructure leases or marketed towards different types of tenants. Think Homes under the Hammer – but on a grander, riskier scale – and with less Dion Dublin.
Not only is this an interesting avenue for risk-friendly investors, but from a communications perspective, value-add funds provide a challenging opportunity to introduce a relative unknown into the wider market. Redwood recently supported the launch of our client M&G Real Estate’s UK Enhanced Value Fund and subsequent acquisition of a number of industrial and office assets.
Naturally, the launch of a new fund investing in something different is enough to attract media attention. The challenge comes when describing what the fund does and presenting it in a digestible, concise way. It is important to remember that “risk” does not mean “reckless” or “scary”. Real estate in general remains a much safer investment than the majority of asset classes, and measured risk is the key to desirable returns.
As value-add funds gain in popularity and more large, institutional investors begin launching their own version, the challenge for PR agencies will be to find increasingly creative ways to generate a media buzz. At Redwood, we work closely with clients and media outlets alike to source comment pieces, speaking opportunities, panel debates and podcasts to add colour to the factual descriptions set out in press releases. You could say, we are already ‘value add’ experts…