Development Deals – Limbo, Limited Pipeline or Never Better Yields

The first day of GRI Europe 2020 kicked off with a discussion on “Development Deals –  Limbo, Limited Pipeline or Never Better Yields.” The panel of real estate industry leaders were cautiously optimistic about the opportunities in the post COVID-19 world. 
Here are some highlights from the discussions:

  • Residential including PRS schemes, logistics, data centre were most favored. However, opportunities in office in areas with favorable demographic trends were highlighted. 
  • Hospitality in vacation focused sectors will be ok, but hotels focused on the business traveler will take a long time to come back and are under the most stress. 
  • In terms of lending, liquidity has picked up but banks financing will prove challenging.

GRI Club Iberia eSummit

I had the pleasure to moderate a GRIClub e-meeting on the post COVID-19  impact on Spain and Portugal’s real estate market:  Iberia – Mapping COVID-19 Recovery, Growth and Inbound Investment Appetite. The e-meeting had over 80 participants including  C-suite real estate executives and asset managers. My co-chairs included Brian Betel, Activium, Mark Tsocanos, Baupost Group, Lorcain Egan, Starwood Capital, Thomas Kottman, Mespil, Michael Abel, TPG Real Estate, and Marta Cladera de Codina, Nuveen Real Estate

The Economic Back Drop

Over the past 3 months, COVID-19 has triggered the worst economic crisis since the Great Depression. In the developed world, GDP declines in Q1 have not been seen since the Global Financial Crisis of 2008-09. Q2 will likely see declines in GDP in the mid-teens to well over 20%+ in some countries (including the US). Unemployment rates have skyrocketed throughout the developed world with no near-term end in sight. This has significant implications for the global real estate sectors and, more importantly, the hospitality industry which is key to Spain’s economy (representing 15% of GDP).  Spain witnessed a decline in GDP of 5.2% in Q1 and expectations are for a decline of almost 15% in Q2. For the full year, Spain will likely see a decline in GDP of 8%.  Portugal witnessed a decline in GDP of 3.9% in Q1 and expectations are for a decline of just under 12% in Q2. For the full year, Portugal will likely see a decline in GDP of just under 7%.  

Spain and Portugal Real Estate Market Q&A

Some of the questions posed to the participants focused on the following questions:

  • Views on COVID-19 impact, recovery and relative performance of asset classes and geographies
  • What are the key drivers to keep investor confidence in current markets 
  • What are the expectations of the lending landscape in a post COVID-19 environment
  • How has risk appetite changed pre & post COVID-19.
  • Is public-private collaboration possible
  • Is Barcelona, Madrid, and Lisbon now considered part of Core or Core+
  • What are the repercussions from the printing of nearly $10 trillion.
  • With tourism representing 15% of Spain’s GDP, what is the impact on real estate and hospitality.

In general, the participants provided a cautiously optimistic outlook for both Spain and Portugal’s economies, despite the significant uncertainties surrounding the Covid-19 pandemic. The residential PRS sector, industrial sector, and high-end office were singled out as well-positioned to recover quickest. As expected, the hospitality industry and retail industry had the most negative outlooks. But surprisingly, participants believe that personal vacations will recovery quicker as people want to travel. In contrast, business travel will likely remain depressed as people have become accustomed and prefer virtual meetings via Zoom and Microsoft Teams rather than travel.  

The Wimmer Family Office continues to expand our partnerships with real estate developers with good track records and an ability to execute throughout business cycles. Our debt and equity financing facilities have a min size of 150mm to well over 1 bn and we are looking to increase our exposure to Spain and Portugal.  In the past three weeks, we have signed engagements and/or term sheets with real estate developers across the globe for over 3.5bn. Separately, I have a joint venture partnership with the Fortress Credit Group to help companies with liquidity needs, including providing non-recourse capital secured by the company’s litigation claims.

The Super Economic and Social Depression of 2020

In the past three decades, China has emerged as one the most admired economies and a super engine for global growth. In the first three weeks of March 2020, China’s coronavirus could trigger the worst economic and social depression the world has experienced since the Great Depression of the 1930s. 

The Super Economic and Social Depression of 2020 has already wiped out trillions in global equity, commodity and credit market valuations. Moreover, the widespread containment measures many governments around the world have imposed on their populations – to deal with the spread of the virus – will result in the sharpest decline in second quarter global economic activity in almost 100 years. Every component of aggregate demand is collapsing including consumer consumption, capital investment, and residential investment with no near-term end in sight. The duration and severity of government mandated quarantine and self-isolation policies will have far reaching implications beyond the financial market and economic impacts to the cornerstones of democratic principles including freedom, liberty and the pursuit of happiness both individually and collectively. 

In many respects, the 2020 Super Economic and Social Depression of 2020 is much more severe on the average global citizen than the Great Recession of 2008. Indeed, the financial crisis of 2008 was primarily centered around the global banking system and housing markets. Although the global economy and banking sectors were strong when the pandemic started, the 2020 Super Economic and Social Depression of 2020, will wipe out entire sectors of the global economy beyond the likely headline and high-profile bankruptcies of the largest airline, hotel, cruise ship, and hospitality companies. More importantly, small and mid-size businesses that have been the backbone of a majority of global growth and ingenuity will not be able to survive a protracted economic slump.

The global trend over the past 50 years away from large industrial conglomerates and the exponential growth in the service and technology economies have resulted in a paradigm shift toward small businesses, self-employment, partial employment, outside contractors, and freelancers; otherwise known as the “gig” economy. The gig economy may be as large as a third to a half of some developed world economies, including the United States. These individuals do not have a “safety net” to fall back on in times of global economic and financial distress. The result could be unprecedented mass bankruptcies among small and mid-size companies and a sharp spike in global unemployment. This has far reaching implications for society in terms of economic and political stability.

Social distancing has become the new normal for possibly the remainder of 2020 and beyond. Almost every person on the planet is under mandatory or voluntary quarantine/ isolation to prevent the spread of the deadly COVID-19 virus, which does not differentiate between social class, race, colour, culture, nor religion and because of modern transportation has become a global pandemic in a matter of months. The most heart wrenching is that the most vulnerable to the virus are the oldest and weakest members of society that once exposed must be isolated and thus can’t be with their loved ones for worries over contagion. 

On a positive note, the crisis has prompted unprecedented policy responses from central banks that have reduced interest rates to 0 and flushed the global economy with liquidity. Global policy makers and world leaders are implementing fiscal measures to help businesses and people. In this regard, the United States has announced the largest government stimulus package in the country’s history of $2 trillion that could grow to over $6 trillion to help the country’s struggling businesses and its citizens. European government will likely follow with large government spending initiatives. These measures should help lessen the impact on companies and individuals, but they are only temporary measures.

Moreover, with the resulting blow up in government budget deficits (some cases as large as10-15% of GDP), they will eventually need to be monetised with future impacts on interest rates, inflation and global growth. In the interim, the United States government spending package includes an immediate and one-time government check/direct deposit of a $1000+ to individuals and families. This may cause a small spike in U.S. consumer spending (in particular online shopping), but it is not sufficient to cover rent and mortgage payments, food, medication, and utilities for the masses. Thus, larger scale government intervention measures will need to be taken for both companies and individuals beyond the immediate fiscal pump priming such as mandatory deferments on rent and mortgage payments, taxes, utility costs, etc. Otherwise, the implications for the U.S. and global banking system will be severe as consumer and commercial loan defaults spike alongside public panic. The result will be further falls in global equity and credit markets and a sustained decline in economic activity. 

Away from the financial market and economic impacts of COVID-19, there are encouraging social signs that highlight some of the best aspects of humanity in times of crisis. Indeed, people are coming together and helping each other. This can best be seen by the unselfish and tireless support of doctors, nurses and other healthcare workers putting their own lives at risk to help others. In Italy, people are singing from their balconies to remind their neighbours that we are all in this crisis together. Another trend is that companies both large and small are recognizing that people working from home can be just as productive and successful as they are in the office workplace. This trend has implications for the continued trend toward flexible work arrangements such as telecommuting and remote working from home and can be supportive in the future to the continued growth in the global Build-To-Rent (BTR) market.

Hopefully, government-imposed containment measures will succeed in levelling the number of Covid-19 cases by midyear 2020, which combined with the support of the massive policy responses, will result in a “V” shaped bounce in economic by Q4. Unfortunately, the new normal for our global village will be further global pandemics, heightened volatility in financial markets, sharp swings in economic activity, and social distancing. How governments and individuals respond in the future will be the true test of humanity, but thus far there are reasons for optimism.

When’s the Best Time to Start Financial Planning

A question that often goes unasked these days is, “When should you start financial planning?” These days many are living paycheck to paycheck trying to get by often finding it hard to put any additional money they might have into savings. Many often find themselves saying, tomorrow, but in reality, the best time is TODAY. 

Finding Out What Your Financial Reality Is 

Determine where your finances are currently at and where you would like to go with those finances. Do you want to invest in a house? Maybe a new car? Or even have a safety net in case of emergencies. As your situation progresses and you find yourself having more and more things to put money towards is when this can get slightly more complicated, however putting something aside is better than placing nothing aside. 

Creating a Budget outline 

Before you go to see a financial advisor, you should collect the bills that you currently have and create a rough outline of what your budget could look like. Making sure you have a firm knowledge of what your bills are can help both you and your financial advisor create a solid budgeting plan for you to stick to while you put money into your savings. Start by writing out each bill that you have each month then going back to find out what each bill is every month. If you have a bill that fluctuates monthly such as a credit card bill, putting down an amount for more than what the highest payment of that card payment could potentially be will help you to pay off that payment. 

Seeking Out Help

So when should you speak to a financial advisor? What are they helpful for? Financial advisors can help when it comes to creating a strategy and helping you to eliminate any financial risk that you might have and help you to build your savings over time gradually. They are there to help you create things from budgets to saving for later in life when you plan to retire. You do not have to be rich to seek out a financial advisor. When looking for an advisor, seek out recommendations from colleagues or family members that might have used a financial advisor. There are also various websites such as Garrett Planning Network that will allow you to search their listings for a financial advisor that caters to the middle class. There are also various “Robo advisors” that can help you if you are worried about a more cost-effective option; these often come in the form of websites and even apps. 

Be Patient

Creating a budget to start saving for yourself is something that takes time, and you may have occasions where you may feel like you have taken a step back due to having to draw on that safety net account. Making sure that you are keeping track of your spending, bills, and sticking to the budget that you have for yourself will help. Just remember that the process takes time.

The Artistry of British Architecture

It is said that buildings are like books, you can easily read them just based on their style alone. When looked at this way, it is easier to appreciate the architecture behind many buildings and homes. Eventually, once you become slightly more rehearsed in their background, you will easily be able to understand it just like when you learn a language. Architecture is a form of art that possesses both grace and beauty, a thing that many traditional and modern houses in Britain possess. 

Tudor Style 

Named during the Tudor period, this was the last and final phase of what is to be considered as medieval architecture. Often easy to spot a Tudor, you can recognize it by its dark timber accents and white plaster detailing often laid out in various patterns. These houses were built between the late 15th and early 17th centuries. These stunners often include beautiful grouped windows, some featuring stained glass, masonry chimneys, and half-timbering and gabled roofs. 

Art Deco

This style started between the years of 1925 and 1939. They were often built with simplicity, harmony, and innovation. It had two parts to it, during the first half the “Zigzag Moderne” and the more “Streamline Moderne” in the decade following. Many buildings adopted this style in that time frame, places like public buildings, courthouses were all inspired by Art Deco touches, and many were not revealed until after the war. The main telling point of these structures is their mix of curved walls and sharp angles comprised all into one building. They often had flat roofs and metal railings for their balconies and stairs. 


The post-war era was often characterized by their want to break from the past and the older building styles, but it wasn’t long into the 1960s before the love for older styles had been reignited, and the preservation of older buildings started. Many older style buildings were being renovated and modernized without the compromise of their most beautiful features. This style was thought to improve upon modernism or what was considered the International Style of the building. It had been viewed as cold, harsh, and ugly rather than pleasant or welcoming.

While these are only a few of the housing styles in Britain, they can all be viewed as their pieces of artwork. Over time we have incorporated some of the traditional styles into our now modern builds hoping to keep their charming characteristics. So if you are in the UK area, take time to stop and marvel at these beautiful buildings and take in the culture and artistry that they possess.