A faster recovery

Existing Investors

As real estate markets of Europe are almost all at bottom of cycle, investors and funds are forced to take a long view. Too often, this amounts to inactivity. Internos founders’ cross-border experience of the last major downturn in the early nineties strongly suggests that a proactive attitude can lead to measurable gains in value or income now, and much better outcomes at realisation. Key aspects of this:

the most likely route to short-term asset outperformance lies in advanced and rigorous debt renegotiation. Here, Internos brings cross-border sophistication and a Europe-wide set of high-level contacts. The recent appointment of Mark Cole to the team shows the importance we attach to real estate financing
value is created by consolidating minority interests, simplifying capital structure, liberating management and incentivising to deliver value
a strongly proactive and informed stance to cost reduction comes from Europe-wide operating experience applied to deep-seated national habits

New investors: a return of opportunity

For new investors, there is clear return of opportunity. Few now doubt that the extreme shortage of liquidity that started in 2008, is delivering bottom-of-cycle and distress or rescue opportunities for real estate investors in Europe. In this scenario, Internos adds to the timing advantages of not being a legacy manager two important points of difference: strategy and management of opportunities.

Timing

For new investors, Internos can take full advantage of over-supply in construction with a hugely beneficial effect on cost and speed of delivery. The gap between prime and secondary commercial real estate has widened across Europe. Refurbishment opportunities are now clear and measurable
Public to private conversion opportunities of midcap listed companies are arising throughout Europe as share prices fall below NAV
Mezzanine finance, absent in 2005-07, became dramatically relevant when bank overlending flip-flopped to underlending in 2008. 'Recap/revite' opportunities arise: as marginal lending dries up and projects poised to launch are stopped at the final hurdle

Counter-cyclical strategic shifts

Despite timing opportunities, Internos is just as much intent on working within the trend of longterm shifts in European attitudes, demographics and law:

As energy costs soar and legal pressure intensifies, low-carbon buildings cease to be image plays. They become an absolute corporate need. The value of an energy farm tracks the price of a barrel of oil
In most of Europe, cities are restricted but urbanisation intensifies. New asset classes such as self-storage expand even in recession. Change of use, e.g. from out-of-date offices to apartments, makes economic sense nearly everywhere
An ageing population creates escalating demand for senior housing
On a micro scale: not just in London and Stockholm, politicians are discovering road pricing; in a local recession, there will be new Bilbaos and Bluewaters with rewards for fast-acting and knowledgeable investors. Internos is a keen student of the zonal effect on rents.

Management of opportunities

To take full advantage of 2010-11 opportunities, the Internos approach encompasses three key attitudes and attributes:

A preference and track-record for backing talented and committed local teams willing to share risk
A belief that speed of decision can be vital to financial performance
But only if backed by one of Europe's most experienced investment committees.