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Real estate should not suffer "deep" changes in the long-term
21 May 2020 |

Although in the short-term, investors’ focus might be on assets which were more resilient during the crisis or which present themselves as an opportunity, in the long-term «trends should not change considerably».

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This is Pedro Coelho’s conviction, Square Asset Management’s CEO, who remarked that even now «our investment approach hasn’t changed much». The man in charge of the Portuguese real estate investment fund management company assumed that he continues to «bet on all segments except housing, in order to obtain a highly sustainable revenue cash-flow». And, in this sense, he assumed he keeps working on his «relations with the main targets who are the core tenants and, of course, betting on better yields and better prices per square metre». 

On his performance on the market, he assumed that Square AM is carrying out both sales and acquisitions. «We are selling units which were closed in previous deals. And, on the buying side, we have previously agreed on deals and, as such, we are concluding them», he revealed during the segment Iberian Property Investment Talks. It should be recalled that one of his latest operations was the conclusion at the beginning of March: of the acquisition of Fórum Viseu for 40 million euro.

Looking into the short-term, Pedro Coelho assumed that there are assets which are not as attractive, but which can turn out to be «good opportunities to buy if their fundamentals are good», as is the case of health clubs and assets related to tourism. And, on the other hand, there are those which remained resilient during the crisis and which are, according to him, «more attractive now». This last group includes logistic units, offices and «probably some retail spaces which didn’t suffer much during the crisis», he listed, restating that «in the long-term, the strategy doesn’t change much».

Asset assessment remains uncertain

The variables which enter the equation to assess assets continue to have an uncertain future. Pedro Coelho assumed that this is «a difficult issue», especially since «there is no evidence of the transactions».

On the other hand, there is also uncertainty concerning the buildings’ yields. For Square AM’s CEO, this is a «glass half empty, glass half full» type of question. If on one hand «the REITs maintaining a lower performance for a larger period of time might lower the yields because the spread should remain at the same level», on the other hand «during periods of risk and with greater liquidity, yields might increase slightly ».

«But if we look at the mid-term, the likeliest scenario is that, under some circumstances, vacancy rates increase once again», he added, assuming that there will be situations in which «tenants will be bankrupt». This could mean «a price drop for buildings which become vacant. This is what we saw during previous crises», he concluded.