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In three apparently disparate European real estate markets, there actually exist essential common factors that drive investment opportunity.  A potential investor must consider these essential factors, not only in each market individually, but in the context of other markets in order to accurately identify risk and return.   As asset yield compresses in certain markets, savvy investors may arbitrage market misconceptions to discover alternative markets with less or comparable risk and yet, better asset yield.

In June 2014, Richards Kibbe & Orbe gathered a multi-disciplinary panel of experts to discuss the full commercial and risk spectrum of real estate investment in three European countries:   Spain, Poland, and Hungary.    The panel discussion was hosted by Richards Kibbe & Orbe LLP

Set forth below are three key investment considerations from these markets.

Multiple Markets

All panellists concurred that there is no single real estate market in their respective countries or regions.   Markets divide along geographical lines, with primary, secondary and tertiary locations, and along asset lines of retail/commercial real estate and residential real estate, with further distinctions between office buildings, shopping centres, and logistics warehouses for the former and multi-family housing and student housing for the latter.   As well, markets divide along investor risk profile and appetite with a distinction between prime asset investors and distressed asset investors.  In Spain, it was noted by Jeffrey Sujar Blanco, MD of real estate consultancy Hill International, “Madrid and Barcelona continue to be the main focus of interest…although there exist attractive opportunities in retail in secondary cities and in residential and hospitality along the coastline”.  Speakers from Poland and Hungary emphasised the regional distinction between the north and south of Central and Eastern Europe. Poland is enjoying a record year of real estate investment in 2013 and a further positive outlook for 2014, while Hungary continues to struggle with the interconnected challenges of limited availability of financing, investors, and quality assets.  Pawel Halwa, Warsaw Managing Partner of law firm Schoenherr, observed that Warsaw, Poland’s capital “is experiencing a yield flattening and high competition for best assets, while Polish secondary cities Krakow, Poznan, Wroclaw and Lodz continue to offer competitive yield and a resulting increase in investor interest”.  Similarly, Hungary’s capital Budapest remains buoyant relative to the rest of Hungary”, stated Szabolcs Mestyan, Partner of law firm Lakatos, Köves and Partners.

Active Asset Management

All speakers stressed the importance of active asset management. The availability and implementation of proper asset management was cited as having particular importance to distressed real estate investors.   The speakers observed that post financial crisis, European banks have come under increasing regulatory and political pressure to deleverage, to rationalise their balance sheets, and to dispose of non-performing and non-core assets.   With banks in Spain and Hungary having reported non-performing loan ratios nearing  20% (which ratio is widely considered to be conservatively inaccurate) and the results of the European Central Bank’s Asset Quality Review stress test of 124 of Europe’s systemic banking groups due to be released on October 2014 prior to the November 2014 assumption by the European Central Bank of supervisory oversight of European Union banks, European banks shortly will be forced to disgorge entire portfolios of under-performing and  non-performing loans secured by real estate.  With the other speakers, Eric Assimakopoulos, Founding Partner of Revetas Capital Advisors, expressed concern that in Central and Eastern Europe there is limited experience of servicing single real estate assets and virtually no experience of servicing large portfolios of real estate assets.  Pavel Brezina, Head of Workout Strategies & NPL Sales of Erste Group Immorent, stated that he found it “difficult in Central and Eastern Europe to contract western standard services for a reasonable price”.  With the exception of the ground breaking recent sale of a Romanian EUR 495 million non-performing loan portfolio, banks in Central and Eastern Europe have generally retained and self-serviced their non-performing loans.  Such servicing, as noted by the speakers, has historically consisted of provisioning and straight line depreciation.  With substantial portfolios expected to come to market, the quality of asset management must shift from passive to active.   Speakers characterised an active asset manager as one being familiar with the unique attributes of each asset in the context of its respective market.  Active asset managers must be prepared, as necessary, to invest in the capex of the real estate, reposition the real estate, complete development of the real estate, and manage the real estate until any price dislocation that occurs following a portfolio sale is absorbed by the market.


The speakers also dispelled certain misconceptions about risk profile across the three real estate markets.  Viewed as amongst the riskiest of Western European markets, Spain nevertheless is commonly perceived to be a less risky market than the Central and Eastern European markets of Poland and Hungary.   Certainly, as the speakers observed, Spain has been quicker than Hungary to implement legislation and infrastructure, such as the bad bank SAREB, to support efficient asset resolution and liquidity in the real estate market.  However, both the panel and the audience were interested to learn that Spain in some respects actually presents greater legal risk than either Hungary or Poland.  While Spain, Hungary and Poland have relatively transparent and established legal systems, Spain suffers from a notoriously slow judicial process.  An enforcement of remedies through foreclosure on a mortgage may be concluded in 3-6 months in Hungary and Poland, whereas such foreclosure process can exceed several years in Spain if the debtor files for insolvency.


Europe continues to demonstrate abundant opportunity and diversity within country-specific real estate markets, as well as diversity within primary and secondary city markets within individual countries.  Macro-economic trends within Europe explain some but not all of the variation and the European real estate markets continue to provide abundant opportunities for the well-prepared investor willing to look beyond common misconceptions and discover the essential common factors that drive investment opportunity.

Copyright Denise R Hamer 2014 – Partner, Richards Kibbe & Orbe LLP


Not company earnings, not data but vaccines now steering investor sentiment



Not company earnings, not data but vaccines now steering investor sentiment 2

By Marc Jones and Dhara Ranasinghe

LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.

Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.

Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.

“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.

“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”

The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.

Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.

But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.

(Graphic: Vaccinations per 100 people by country,


Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.

Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.

Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.

“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.

The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.

Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.

“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”

The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.

Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.

Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.

Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.

“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”

(GRAPHIC: Renewed surge in COVID-19 across Europe –

(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)

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BlackRock to add bitcoin as eligible investment to two funds



BlackRock to add bitcoin as eligible investment to two funds 3

By David Randall

(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.

The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.

The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.

A BlackRock representative declined to comment beyond the filings when contacted by Reuters.

Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.

Bitcoin tumbled 10.6% in midday U.S. trading Thursday.

Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.

“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”

There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.

BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (

(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)

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Bitcoin slumps 10% as pullback from record continues



Bitcoin slumps 10% as pullback from record continues 4

LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.

The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.

Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.

(Reporting by Julien Ponthus; editing by Tom Wilson)

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