Car parks are gaining wider acceptance as a legitimate sector of Commercial Real Estate (CRE) investing. Further, this type of asset continues to grow and adopt many of the features of the broader commercial property investment field, so much so, that more and more inside investors and institutional investors are including car parks as part of their overall strategy when constructing their portfolio. Building a portfolio of car parks offer the benefit of having a risk reducer that looks sustainable over the long-term.
As a result of all the emailss I have been receiving on investing in car parks, in my next posting, I will explore 4 possible benefits that car parks real estate provide to investors’ portfolios (for example; it acts to reduce overall portfolio risk, it achieves high equity returns, hedges against unexpected inflation or deflation and reflect the overall investment universe and/or deliver strong cash flows. However, given real estate's nature as a debt-equity hybrid and the emergence of new ways to invest in the commercial real estate markets, it is clear that there could be additional motivations for choosing to include car parks in a mixed asset portfolio. It is important to note that car parks are recession proof and still remain a lucrative source income and wealth in todays market.
Friday, 18 December 2009
Thursday, 10 December 2009
Financing caravan parks: The New Gold Rush!
Over the past 24 months caravan parks have emerged as hot property, or better put, highly sought after assets. In the wake of the recession, coupled with rising air travel, more and more families across The U.K. Europe and USA are choosing to spend their vacations at home rather than go abroad. Hence, giving birth to a new trend, referred as; “Staycation”. As a natural corollary, caravan parks and lodge parks have grown in popularity, becoming the preferred choice for holidaymakers when booking a vacation. Caravan parks holidays are not just popular amongst average holidaymakers, but there have also been a surge in demand from celebrities and sports stars.
In 2008, bookings at Caravan Parks in the U.K. rose by 40% and achieved an occupancy rate of around 99% during the Easter vacation period. Rental yields average around 6%-7% with the fully equipped parks averaging around 10%, thus proving to be a lucrative commercial property portfolio. Today, more and more portfolio builders (one type of inside investors) are adding this type of asset to their portfolio. Caravan park portfolios offer investors lucrative returns on investment, equity growth, high rental returns and is apparently recession proof since there is little evidence of business failures. To emphasise the extent of the increase in demand for this type of commercial real estate asset, most banks are eager to lend to investors despite tight credit problems. Additionally, institutional investors (like pension funds and private equity firms) are queuing up to get piece of the action. For example, in 2008, GI Partners allocated £400 million to invest solely in caravan parks throughout Western Europe. In February 2007, GI Partners purchase Park Resorts from ABN Amro for £440 Million.
Are you keen to add caravan parks to your portfolio? Perhaps, as a means of generating positive passive income? Well, 2010 may be your year as this can be done (and in some cases) with a very small deposit. For starters, you can tap into either the credit market or the asset-backed market. The finance methods for this type of asset includes, Convertible bonds, Real Estate Investment Trust (REITS), Commercial Mortgage Back Securities (CMBS) and Hybrid Securities to name a few. In the U.K. most high street banks will easily lend to portfolio builder who intend to buy caravan parks, which are managed by a specialist operator. Recently, Barclays Bank Plc launch a product just for caravan purchases.
To obtain the full copy of this article or to learn how to structure any financial arrangement to purchase a caravan/lodge park, visit http://www.youpublish.com/insideinvestors for more details.
In 2008, bookings at Caravan Parks in the U.K. rose by 40% and achieved an occupancy rate of around 99% during the Easter vacation period. Rental yields average around 6%-7% with the fully equipped parks averaging around 10%, thus proving to be a lucrative commercial property portfolio. Today, more and more portfolio builders (one type of inside investors) are adding this type of asset to their portfolio. Caravan park portfolios offer investors lucrative returns on investment, equity growth, high rental returns and is apparently recession proof since there is little evidence of business failures. To emphasise the extent of the increase in demand for this type of commercial real estate asset, most banks are eager to lend to investors despite tight credit problems. Additionally, institutional investors (like pension funds and private equity firms) are queuing up to get piece of the action. For example, in 2008, GI Partners allocated £400 million to invest solely in caravan parks throughout Western Europe. In February 2007, GI Partners purchase Park Resorts from ABN Amro for £440 Million.
Don't be put off by the big players coming into the industry as there is lots of room for growth. Last year, the caravan park industry was valued at £6 billion in the U.K. and £100 Billion in the USA respectively. In Europe, there is still an undersupply of caravan parks. Currently, Britian is the fastest seller of caravans in Europe, followed by its nearest rival Germany, Holland and France. According to the National Council of Caravans, there are just a little over 4,200 caravan parks in the UK licenced to take 6 or more caravans. 15% of these parks are owned by corporate investors and 85% are owned by families. Nevertheless, caravan parks, undoubtedly are a secret gold rush and many finance options are available to investors to fund the acquisition and development of such assets.
Are you keen to add caravan parks to your portfolio? Perhaps, as a means of generating positive passive income? Well, 2010 may be your year as this can be done (and in some cases) with a very small deposit. For starters, you can tap into either the credit market or the asset-backed market. The finance methods for this type of asset includes, Convertible bonds, Real Estate Investment Trust (REITS), Commercial Mortgage Back Securities (CMBS) and Hybrid Securities to name a few. In the U.K. most high street banks will easily lend to portfolio builder who intend to buy caravan parks, which are managed by a specialist operator. Recently, Barclays Bank Plc launch a product just for caravan purchases.
To obtain the full copy of this article or to learn how to structure any financial arrangement to purchase a caravan/lodge park, visit http://www.youpublish.com/insideinvestors for more details.
Tuesday, 1 December 2009
Financing Commercial Real Estate Deals:
In times when conventional credit markets are tight, cash is king. However, for commercial real estate (CRE) investors with little cash, alternative finance methods are employed. Since the 2007-2008 credit crunch many inside investors and portfolio builders have been resorting to alternative finance methods to fund the growth of their portfolio. In my book, I have discussed some 25 different ways to finance commercial property acquisition. In this blog, I will discuss two methods, namely, convertible bonds and mezzanine finance.
A convertible bond is a fixed/floating interest bearing bond note issued by a company or its subsidiary to raise finance from private investors; the latter having a contractual option to convert the bond into cash or shares in the issuing company at a future set date, at a pre-agreed price. Many convertibles, particularly Euro convertibles, are issued through special purpose vehicles (SPVs), (typically via an offshore subsidiary, set up in the BVI, the Cayman or Jersey).
Convertible bonds are very advantageous to portfolio builders, as they can (1) maximise their return on equity by delaying the sale of equity in their venture, (2) raise additional capital at a very low cost and (3) the bond offers low risk to both bond issuer and holder. Although, more commonly used in the USA and Asia, convertibles have been growing in popularity in Europe over the pass 5 years, particularly to fund, Mines, Shopping malls and multi-storey car parks. Recently, Vedanta Resources raised US$1bn to increase its stake Sesa Goa, the iron ore producer and in June 2009 ArcelorMittal raised €1.25bn ($1.7bn) despite claims that the downturn was worsening.
Mezzanine finance, another type of alternative finance technique, offers investors a way to raise huge amount of finance without going public or potentially ceding ownership of their company from the outset. It is structured as an un-secure loan requiring no collateral, no credit checks or any traditional bank loan criteria. The downside, however, is that it is a very expensive form of finance, bearing rates between 20%-30% of the capital borrowed. Thus, it is ideally suited for high yielding projects. Further, in the case of a default, lenders have the contractual right to convert their stake into equity or ownership of the company. Developers of big projects, like hospitals, stadiums, resorts and marinas used the mezzanine finance method a lot.
In conclusion, regardless of whether finance is widely available or not on the open market, inside investors have access to numerous methods to raise finance to fund the expansion of their property portfolio. To them knowledge is king, as the availability and choice of alternative finance(s) is governed by a sound venture, excellent occupancy rate potential and positive inwards cash flow. If you want help in structuring an alternative finance deal, feel free to email us.
A convertible bond is a fixed/floating interest bearing bond note issued by a company or its subsidiary to raise finance from private investors; the latter having a contractual option to convert the bond into cash or shares in the issuing company at a future set date, at a pre-agreed price. Many convertibles, particularly Euro convertibles, are issued through special purpose vehicles (SPVs), (typically via an offshore subsidiary, set up in the BVI, the Cayman or Jersey).
Convertible bonds are very advantageous to portfolio builders, as they can (1) maximise their return on equity by delaying the sale of equity in their venture, (2) raise additional capital at a very low cost and (3) the bond offers low risk to both bond issuer and holder. Although, more commonly used in the USA and Asia, convertibles have been growing in popularity in Europe over the pass 5 years, particularly to fund, Mines, Shopping malls and multi-storey car parks. Recently, Vedanta Resources raised US$1bn to increase its stake Sesa Goa, the iron ore producer and in June 2009 ArcelorMittal raised €1.25bn ($1.7bn) despite claims that the downturn was worsening.
Mezzanine finance, another type of alternative finance technique, offers investors a way to raise huge amount of finance without going public or potentially ceding ownership of their company from the outset. It is structured as an un-secure loan requiring no collateral, no credit checks or any traditional bank loan criteria. The downside, however, is that it is a very expensive form of finance, bearing rates between 20%-30% of the capital borrowed. Thus, it is ideally suited for high yielding projects. Further, in the case of a default, lenders have the contractual right to convert their stake into equity or ownership of the company. Developers of big projects, like hospitals, stadiums, resorts and marinas used the mezzanine finance method a lot.
In conclusion, regardless of whether finance is widely available or not on the open market, inside investors have access to numerous methods to raise finance to fund the expansion of their property portfolio. To them knowledge is king, as the availability and choice of alternative finance(s) is governed by a sound venture, excellent occupancy rate potential and positive inwards cash flow. If you want help in structuring an alternative finance deal, feel free to email us.
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