Iain Fanthorpe (Bluehouse Capital) insists that property investments aren’t just designed to protect against inflation…thanks to rising rents, they deliver. That was true during the last decade when inflation lay dormant. But he says it will continue to do so even in today’s challenging environment. Bluehouse is a value-add real estate investor focusing on Central and Eastern Europe.
Fanthorpe says the current market environment shouldn’t come as a complete surprise to experience investors and companies. “This is where strong asset management prudent business plans has benefits,” he says, pointing out that unexpected situations often arise over the course of an investment. “With our assets, if we take a bottom up approach during our investment cycle, we feel that we can manage the process through the whole period until the environment is a little bit better…We’re always very conservative in our underwriting, which allows us to sort of manage the bumps along the road. That’s what all prudent investors should be doing.”
“Leases are drafted in a way where we’re obliged to index rents annually,” he says. “So subject to the euro index, we will have no choice but to increase the rents and the tenants will have to absorb that. That’s what they signed up for when they sign a real estate lease. That’s the market standard and it’s where we see the strength in a lease agreement…that’s why real estate as an asset class is attractive — because they are linked to indexation, which is different from different from other asset classes.”
Asked about the pace of construction inflation, Fanthorpe has observed a “settling”, making it easier to come to an agreement on prices with contractors. But the issue of timing continues to be challenging. “The uncertainty still is there with regards to delivery times,” he says.
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