“These funds had what I call an annual Christmas gift. They basically benefitted from a valuation uplift on the building without the requirement of a transformation,” says Kohalmi in an interview with The Edge Singapore. “It was very beautiful and very easy while you could have it, but obviously I believe that no longer holds.”
The steady price appreciation enjoyed by real estate owners in an era of low interest rates has come to an end. A key way for them to receive decent returns is to try and turn their properties from “brown” to “green”, to ride on the growing trend of greater focus on sustainable assets, says Zsolt Kohalmi, global head of real estate at Pictet Alternative Advisors.
For years, a large group of real estate owners, the so-called “core funds” that buy properties to lease out and enjoy annual cash flows, were able to enjoy steady returns. This even if they let the properties remain as they were, without investing to enhance the assets. Kohalmi, who is also deputy CEO of Pictet Alternative Advisors, explains that as a result of a low funding cost environment, asset prices all around were appreciating.
