Sweden a safe haven for those who prefer bricks and mortar
WITH euro cash on bank deposit now providing all-time low returns, property as an investment asset class maintains its attraction. A lack of borrowing capacity and continuing market uncertainty at home is forcing Irish investors to look elsewhere for wealth-protecting assets.
Contrary to popular opinion, some property investments over the past decade have done quite well. Investors in Sweden, in particular, have had a very positive experience. Values have held stable, the economy has remained strong so vacancies are low and rental returns continue to be attractive.
It's a complex market. One way of getting into the market is Swirish Property AB which was formed in 2005 by Youghal-based Sam Roch-Perks and his Swedish wife Petra.
The company sought to capitalise on considerable knowledge of the stable and secure Swedish market offering exposure to a strong kronor – a viable hedge to the struggling euro.
Following considerable investigation the company concentrated on the western coast of Sweden, in satellite cities around Gothenburg.
Some peers took on investments in Stockholm but Roch-Perks and his partner Des Quigley knew from their due-diligence that Stockholm and surrounding areas were, and still are, too expensive to provide sustainable returns.
In retrospect, investments in Stockholm have not performed in any way satisfactorily whereas western Sweden has continued to flourish. Swirish has successfully sourced, and continues to manage, a profitable investment portfolio along Sweden's western coastline.
This includes 500 residential units, over 100,000sqm of commercial space, and a number of development opportunities.
Since 2005 Swirish has sourced over €170m worth of property and, following some recent profitable sales crystallising capital gains, it now manages portfolios valued at over €115m.
Where Swirish differs from its peers is a strong commitment to being hands-on with proactive management. The property is sourced, managed and eventually sold if the client wishes to crystallise gains.
According to Roch-Perks: "We personally check every property to make sure it fits our criteria. Many more properties fail the tests than pass them."
Roch-Perks initially sourced and managed their own property portfolio. Word spread and investor demand saw them acquiring and managing property for a range of clients – individuals, groups and institutions included.
The operation now has an office in Co Louth, run by Quigley, and two Swedish management offices in Trollhattan and Karlstad.
The criteria for investment are fairly simple. Apart from obvious structural checks, the property has to be sourced with a documented return and at a price offering a satisfactory yield – it has to be generating cash from day one with strong tenants in place and bank backing.
Swedish banks are notoriously risk-averse, so their support supplies positive reinforcement. Swedish interest rates are historically low, at around 4.25pc, with borrowing available up to 65pc LTV.
The Swedish government is proactive so the economy is robust and the Swedish krona has also proven a real safe-haven currency amid the euro storm. The key, according to Quigley, is being on the ground to source deals and manage affairs.
"Anybody involved in property knows how important it is to monitor a portfolio closely and manage issues before they become problematic," he states.
This, more than anything else, is what has led to the company's success.
The portfolios are managed proactively to make sure they perform to their full potential. This has very much been the case from 2009 to 2012 as the company shored up its clients' assets from the euro crisis which had an effect in Sweden, although not as much as elsewhere.
Swirish has maintained a focus on medium to long-term real estate investments at values between €2m and €18m.
Below that local Swedes are active and over that institutions pick up most of the product. Acquisitions span a range from residential, through retail, industrial and include a large development project outside Karlstad.
In 2011, the company achieved outline planning for 1,600 residential units and 12,000sqm of additional industrial space in Karlstad. Sweden is remarkably short of residential property and demand for industrial space remains strong, so this portfolio's value has been increased dramatically.
Swirish will conduct a number of investor meetings countrywide over the coming weeks, starting in Dublin. For further information, phone 042 937 8877 or visit www.swirish.com.