Trading the Value Gap
Until recently, there were three constants in life: death, taxes and the property cycle. The advent of property derivatives has reduced these constants to two and has given real estate investors a tool to smooth the perennial troughs associated with the property cycle by enabling positive returns even when the market is in freefall.
Assuming the economic rationale that property investors are profit maximisers, the traditional property investment surveyor or fund manager will buy a building, or a portfolio of buildings, with an “angle”. In this instance, an angle is synonymous with what a hedge fund manager refers to as “alpha” or excess market returns. The efficacy of the investment surveyor or fund manager in adding value through this angle is determined by the employment of one, or more, of the following tools throughout the lifetime ownership of the asset or portfolio: