The quick sale of commercial property assets, as a consequence of non-performance, to alleviate distress or for profit was once key to most real estate investor’s survival. Further, property investors of the 80s and 90s, whether private or institutional, saw disposal of their property as a clever exit strategy. For many decades “asset dumping” top buyers of real estate business plan in relations to their contingency plan. With the exception of a few, the “Asset Re-inventing Strategy” was commonly used as an acquisition strategy rather than a strategy for breeding life into non-performing real estate assets. However, in most recent times, where banks’ insolvency fears are high and liquidity is tight, coupled with falling property values and fewer buyers coming onto the market, most asset-rich investors have been desperately resorting to sale and leaseback agreements over the last decade. They offered property deals with enticing rental yields or huge discounted prices to dispose on non-performing assets and to financially stay afloat.
Conversely, savvy asset builders have been utilising the asset reinventing strategy as part of their armoury to maintaining a high performing property portfolio. The term reinvention, when commonly used, generally relates to the reinvention of a business model or an individual person career. Average investors do not think of re-inventing a property asset, particularly because of their over indulgence with residential property (and other so called asset classes). To many, this strategy is contradictory to conventional thinking. Nevertheless, this is one key reason why savvy asset builders are super rich, because they assets that can be reinvented when they are no longer lucrative. Hence, commercial property is by far the best asset class to invest in as it can be re-invented when returns and yields have dried up and it is coming to the end of its asset life cycle. The reinventing of a commercial property asset simply means to reconfigure or change its usage from one type of property asset that is not performing to another type which will become a cash cow. This strategy is best applicable when market conditions are changing or in a bit of turmoil.
This point can be exemplified further, when in 2007, the owners of kwik-fit instructed Savills to auction off its 148 Car Repair Garages, which were quickly bought by private investors from the U.K., Holland and France. In hindsight, such properties could have been re-invented or change to swapping stations, (an asset which is now regarded as hot property).
As we approach a new era of commercial real estate investing on the back of the worst economic crisis since 1930’s more sophisticated property investors will adopt the reinventing strategy. As I write, Petrol stations are changing hands rapidly. Car Parks are becoming solar power parks, care homes being reinvented into outpatient centres and supermarkets, such as, Waitrose are becoming energy hubs.
British Gas is expanding its property portfolio and have started rolling out solar-power car parks around the UK, targeting hospitals, shopping malls, airports etc (see http://www.newenergyfocus.com/do/ecco/view_item?listid=1&listcatid=32&listitemid=2679 ).
To find out how you can take capitalise on the new and lucrative commercial property invest opportunities arising out of the green Revolution, there is a great book with over 20 gold rush property assets, called; “Surviving Amid The Rubble”.
