Results du jour from Brixton: Tim Wheeler wheels out Bob Dylan lyrics to help interpret the state of the UK property market as seen from his Chief Exec’s perch at UK REIT Brixton plc (the equity price graph of which nicely mirrors the cycle since 2000). He quotes (or maybe even karaokes) from “All Along the Watchtower” thus:

There must be some way out of here
Said the joker to the thief
There's too much confusion
I can't get no relief
Businessmen they drink my wine
Ploughmen dig my earth
None of them along the line
Know what any of it is worth
And adds his own, less musical but uncomfortable for the serial deniers, contribution:

“Certainly, a fundamental current problem with direct property is indeed assessing value to "know what any of it is worth".

The IPD UK Quarterly Index has shown relatively modest falls in capital values during H1 08: -8.3% throughout the commercial sector and -8.2% for industrials. But there have been few relevant comparable transactions. There is no real depth of evidence of willing buyers and sellers - the RICS Valuation Standards' assumption. Financing remains difficult and sellers are reluctant to crystallise lower prices.

If the "thieves" are the funded or equity based opportunist buyers and the "jokers" are the owners who won't sell, there is no "way out" of this impasse - yet.

[…]

So what is the "way out of here"? We believe that the sector could start to stabilise and recover if increased volumes of secondary and tertiary stock are traded in the next 6-12 months as distressed property starts to be made available. Initially, this should enable a return to more appropriate mark-to-market pricing.”

Full text here; and the vulnerability of the portfolio's yield is best enjoyed with Hendrix.


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