Commercial real estate assets in Mexico have historically rewarded careful investors with attractive risk-adjusted returns, both on a relative and an absolute basis. While domestic crime stories have attracted media attention, our primary approach to Mexico continues to be analytical. Evaluating key macroeconomic and real estate metrics in Mexico shows real estate fundamentals are aligned, creating favorable return potential.
The hotel industry always has been highly correlated to the economy, so it was no surprise that the industry went into a tailspin following the global financial crisis in the fall of 2008. It also was not surprising that institutional investors immediately identified an opportunity to take advantage of the distress in hotels.
New commitments to real estate by pension funds are expected to remain somewhat muted in 2012 due to a variety of inhibiting factors, including domestic and global political and financial market uncertainty, limited liquidity in the debt capital marketplace and the transaction marketplace, an overhang of approximately $68 billion of previous capital commitments that are on the sidelines waiting to be invested, and a narrowing gap between target real estate allocations and actual allocations. Despite these factors, real estate commitments are expected to increase 17 percent in 2012, and investors continue to rank the asset class as the most attractive option on a risk-adjusted basis.
At the beginning of last month we held our sixth annual North American Visions, Insights & Perspectives (VIP) conference at J.W. Marriott’s Camelback Inn in Scottsdale, Ariz.
Over the past couple of quiet holiday weeks, I made an effort to clean up my messy office. I had piles on piles of presentation pitch books friends and even strangers had sent me asking that I review them and provide comments, suggestions, criticisms, etc. As I remember fondly the help “veterans” gave me when I started out in the investment management business, I try my best to respond to such requests. In addition, I often find them quite interesting to read as it gives me a window on who is out there and what they are doing.
Investors in private equity real estate encounter unique challenges developing and executing an investment strategy when compared to investors in either stocks or bonds. Specifically, the process of buying and/or selling physical assets places constraints on the speed and cost of executing a new strategy or tactically shifting an existing strategy to reflect changing market conditions and investor expectations. If investors are over- or underweight versus their targeted allocation to stocks and bonds, they can quickly and efficiently change their portfolio’s exposure to these asset classes, or to specific sectors or risk strategies within either asset class.
Risk management is a hot topic as of late. The market crisis of 2008 and 2009 raised the topic to a new level of importance. In the process, new ideas about risk management have emerged, and many people are modifying their definition of risk and their approach to managing it.