A Word of Welcome

Alan and Almie Louis

Our Global Property Report is a collaborative effort between our treasury, property management and financial services divisions. This past year has subjected the global economies to one of the worst financial storms in living memory. The global community has been negatively impacted and there was very little anyone could have done to fully shield themselves from the adverse effects of the storm. All asset classes have been affected, including property. England experienced one of the biggest drops of all jurisdictions. It is important to note, however, that it is the debt used to finance property that has greatly affected property returns, rather than property itself.

I am encouraged by the positive indications that we will soon get back onto the road to recovery. As this turn-around begins to take effect, the debt instruments that have hampered the property market during the crisis will be the very catalysts that will pull property through to renewed profitability.

At Louis Group we are convinced that an investment in property, especially commercial property, should form the foundation of the long-term strategy for wealth creation. Where the drop-off in other asset classes has seen a decline in value of up to 50%, commercial property has not experienced such a sharp decline. More importantly, rental incomes do not cease when markets erupt – “an empty share certificate” will always be worth less than “an empty property”.

The way property has performed under the most adverse circumstances has again reinforced our long-held view that it should be the “asset class of choice”. Even in the midst of this turbulent period, our property portfolios in Switzerland and the Isle of Man have continued to perform well. Our investments in Germany have been negatively affected, but should recover soon due to the high quality of investments held.

Property values in England have been the most adversely affected in this crisis, but this is understandable when you consider that England is the financial centre of the world and as a result it was inevitably punished the hardest by the downturn in the financial markets. However, as the pendulum swings the other way, it may well be the first to experience the beneficial effects of a recovery. England has an exceptionally fluid and dynamic property market and it has long enjoyed its reputation as the “property capital of the world” due to its transparency and accessibility.

Regarding current property valuations, we have chosen not to base our valuations upon those provided by external valuation firms because of their excessive conservatism in times of crises. It must be remembered that one can only truly ascertain the value of a property when it is sold; however, our valuations are based on our experience and knowledge of both the property and our tenancies. Most of our buildings have strong covenants, which are reinforced by our high level of service to them. The income streams from our properties have thus been largely unaffected in these testing times, demonstrating the supremacy of this asset class.

This has proven to be the ideal time to operate as a private company. Our investors are protected within “closed-ended structures” with clearly defined entry and exit dates; and as a private company we are able to reduce infrastructure costs and actively manage these investments to ensure stable returns.

Please remember, my team and I are fully committed to working together with you, our valued clients, to preserve and grow our relationship and capital. We appreciate your ongoing support and will continue to source opportunities which will bring us all into greater levels of prosperity.

Sincerely,

Dr Alan Louis