Would certainly choose your beans over Bulgarian investment property Wexfordguy but what about property investment funds? beans or pifs?
How are property investment funds going to provide a positive return moving forward? Managers are bleeding the funds dry; Commercial prices are down at least 20% or so across Europe in 12 months; Commercial rentals also heading south fast; these funds are geared up the ying-yang and financing cost not getting any cheaper despite recent ECB rate cuts.
In most cases current investors are getting murdered and cannot liquidate their interests. How will these funds attract new investors to keep the ponzi structure going? IMHO many will simply implode.
My advice stay well clear of pifs.
I'm not sure I agree with the above blanket statements and conclusion. You raise the right issues, but I think you have to look much more specifically at each individual fund, their track record, the underlying property portfolio, and their financing.
I have looked at two or three of the property funds locally and they look pretty solid to me at the current share-price levels. I am actually buying more shares at these levels.
One fund specialises in shopping centres located in dominant/prime locations in mainland Europe. Net rental income was up last year 4.9%. Occupancy rate was 96.6% Direct result up 4.5%. They are leveraged less than 40% at 5.1% interest rates (of which 65% is fixed rate with an average maturity of around 8 years) so finance costs look to be under control and they are not "geared up the ying-yang." Looks like 10-15% of rental contracts are renewed every year (my rough guess based on published figures which suggest an average of 5 year+ contract life) so temporary short-term fluctuations in rents should have little effect on the result. Nett rental yields from new projects are 7%. They have a policy to pay most of the direct result out as the cash dividend, but not more than 100%. There's plenty of cash generation and the dividend is covered, so they're not getting "bled dry." OK the indirect results are going to get hammered in 2009 as values slump, but that is already known and anyway were never reflected in a serious upward spike in their share price in 2006-2008 when values were rising. It's been a similar steady-growth story even if you go back 10 years in their annual reports.
Another fund is more local to one country and has a slightly wider portfolio with more commercial premises, office space and some domestic homes. Its share price was under pressure and down approx 50% last year. But they recently released a press statement that the roll over of their finance for 2009 is now 100% complete (275M€) and the share price recovered 14% last week.
Both funds are highly liquid and publically traded on the stock market with decent daily volumes, so there's no question of getting jammed in a rush for the exits. Equally the share price has traded down gradually over 2008, but investors are not in any way "getting murdered" either if you compare it to the rest of the market.
These are no big name "Trump Tower" or "Bodrum Hotel and Villas" style single-project investments that rely on hype in the domestic market to attract a price premium.
To me, these look exactly like the sort of transparent, long-term, conservative, property investments that I should and do invest in (as part of a balanced portfolio).
Or do you have other information that means I should be heading for the exit?