Real Estate & Infrastructure Trust

real estate trust

“There has never been a better time to buy in Spain than now.”

Mark Stucklin, founder of Spanish Property Insight

When asked about their most valuable asset, real estate is one investment category that most people will quickly come up with. It impacts on their daily lives, their own property often being their primary residence. There is little mystery about making money through investing in real estate. The fundamental concept of buying low and selling high is straightforward and obvious; though there are many other innovative ways to capitalize on real estate investments that can add value to society.

Due to the recent global economic turmoil, many private citizens and businesses have found themselves in situations where they were unable to afford their existing mortgage payment and, thus, were forced to sell or downsize. As a consequence, there is a staggering amount of undervalued real estate on the market around the globe, even in prime locations. One can capture great value from such “distressed” properties with a buy and hold strategy, waiting for economic recovery to bolster values. A more innovative and sustainable approach is to turn distressed or “red” real estate into “green” real estate – this is done by turning them into parks, urban gardens or even urban farms or eco-friendly parking lots.

The UNO Real Estate Trust & Infrastructure seeks growth through real estate investments that take advantage of recent socioeconomic trends and economic fluctuations to capture value that was lost in recent years. What is created as a new value is the conversion of these properties into “green spaces” that are not only environmentally friendly, but also potentially income generating.  

Cycles of Boom and Bust

The global economic situation over the past few years can be described as nothing short of turbulent. People around the world are still feeling the effects of the banking collapse of 2007/2008 and confidence levels still remain far from where they were in the years before. People and companies around the world have downsized their assets, leaving a glut of properties on the market at tremendous discounts.

One notable example is Spain. With an economy that was so highly dependent on residential construction, Spain has seen housing prices drop by over 30% since 2007; some experts believe the gap from peak to trough will reach 75% by 2015 when prices are expected to go up again.

New home construction screeched to a halt in 2008, leaving many construction projects unfinished and around one million new homes unsold. Many owners have been forced to sell their properties for a fraction of their value, particularly vacation properties in prime locations. Due to more conservative lending practices by banks, it has become harder to get financing, making it more difficult for average investors to capitalize on bargains. The combined effect is a virtual smorgasbord of real estate bargains that can be bought by anyone with cash.

This is just one simple example of how the UNO Real Estate & Infrastructure Trust can capture enormous value that has been lost in recent years: invest mainly in highly sought after locations to maximize the return on invested capital as the economy recovers.  

All That Glitters Is Green

Another strategy is to turn distressed or abandoned properties into “green” spaces. This follows the example of a recent trend set in the USA, where investors are turning abandoned plots of land in the surroundings of cities into beautiful parks. The green areas not only improve the local environment and economy through job creation, but they help improve the health of communities, encourage businesses to move in and, thus, increase the overall value of the land and adjacent properties.

One real estate “experiment” running in the states is “Red fields to green fields” (http://rftgf.org/joomla/), a program designed to study the effects of real estate investments in abandoned or distressed areas of land (and adjacent properties) and their conversion into communal parks.

Another way of using such properties is by turning them into plots for urban agriculture. Companies like BrightFarms (brightfarms.com) in the USA and UrbanFarmers (http://urbanfarmers.com/company/) in Switzerland are turning rooftops into sustainable and profitable farms. Urban agriculture land can bring tremendous benefits to cities, including reducing rain run off, increasing humidity levels, decreasing temperatures, and serving as a component to solid waste management through composting. The most useful aspect to such projects is of course the production of local produce that can significantly reduce food miles and the associated carbon footprint of food consumed in a city.  

A Driver’s Nightmare, an Investor’s Pot of Gold

Despite the economic turmoil in recent years, the middle class of some emerging countries continues to grow at staggering rates. Along with it comes a concomitant growth of car ownership. China has become the largest new car market in the world and Brazil has overtaken Germany as the 4th largest market thanks to a middle class that has been growing consistently over the past decade.

The good news for investors is that the growth rate of purchased cars in such locations has far exceeded that of new parking infrastructure. Thus, there are many opportunities to invest in income-generating real estate like multi-story car parks. Drivers are finding it increasingly difficult to find parking spaces in the city, particularly in places like Brazil where the explosion in car purchases was not met by a similar increase in provision of parking lots.

The parking situation has become a nightmare for drivers, but a rich opportunity for investors. The combination of high demand for parking and reduced real estate prices make this a prime time to invest in innovative income-generating properties for parking, especially in rapidly growing economies like Brazil and China.

A key advantage of such real estate investments versus other commercial properties such as office buildings is their relatively low recurring capital investment and maintenance costs and high revenue potential on a square meter basis. Car parks in Brazil can bring in several million euros per year in revenue, depending on size and location. Compared to office building owners who find themselves continually injecting capital for repairs, preventative maintenance and modifications of interior spaces to suit a revolving tenant base, multi-story car parks are relatively maintenance-free and have more consistent occupancy on an annual basis.

The goal is to bring multi-story car parks into the 21st century by applying the same “green” standards to them as to hotels and other commercial buildings. Companies like Green Park (greenparkgarage.com) are starting to do just that by building fully automated, eco-friendly parking garages. One could imagine modernizing new or existing car parks with solar panels to support lighting, ventilation and, more importantly, charging capabilities for the growing number of electric/hybrid cars. Giving customers the peace of mind of knowing their electric vehicle is charging, while they are at work, will increase the acceptance and growth of such vehicles. In turn, this will bring tremendous environmental benefits, while reducing dependence on fossil fuels. Such value-added parking structures would support higher parking rates with additional revenue streams coming from the feeding of solar energy surplus into the grid.

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