Alternative investment opportunities

Knight Wood Assets

Any wealth manager will counsel diversity for a healthy investment portfolio — for the average investor looking at a comfortable retirement and the multinational corporation alike. With politics impacting currencies, cooling measures in multiple jurisdictions, and shifting demographics everywhere, investors can no longer rely on a collection of apartments to generate or maintain wealth.

No matter the sector, diversity is key to strong investment performance. Knight Frank’s annual Wealth Report notes prime locations (Berlin, Austin) and asset classes, as well as investments of “passion” (classic cars, coins and stamps, wine), as part of an investors’ bigger picture. But alternatives like student and senior housing on the residential front, and data centres, self-storage and boutique hotels on the commercial side, and a raft of “other” assets in between, such as car parks, are gaining traction.

Student accommodation and retirement residences are among the strongest residential alternatives available to investors. The strength of each is in the numbers. International students are a growing segment at many of the world’s most popular universities — particularly in the UK and the USA. Yields can reach double digits for properties in the right location, and parents often guarantee leases. Student accommodation is purpose-built for leasing, and with post-secondary enrolment holding steady or rising in some locations — due to the flood of Asian and Middle Eastern parents sending their children overseas for university — the tenant pool is steady. Not every student is the scion of an UHNWI who simply buys a flat. Rentals are in high demand and the supply gap that makes for strong investment. Student housing investment topped US$16 billion in 2016, with the strongest growth markets in France, Germany, the Netherlands and Australia according to Savills Australia’s World Student Housing Spotlight 2017-2018. Yields range from a low of 3.75% (in London) to a high of 6% in Australia.

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For retirement housing, the United Nations notes that there will be nearly one billion people over 65 by 2030 in Asia alone, making senior-friendly residential property a growth sector, for managed care, assisted living and independent residences with perks. James Shepherd, CEO of Knight Wood Assets in London, offers Care Home Development freehold investment, starting at HK$600,000, in a market that isn’t going to contract any time soon. “The UK Care Home sector is facing a ‘huge shortfall’ in available patient beds, and up to 3,000 elderly people will not be able to get beds in UK care homes by the end of next year,” argues Shepherd, citing BBC News. JLL research notes 14,000 care home beds will be needed annually by 2026, and James Kingdom, head of alternatives research, argues the UK needs to double the number of care home beds it’s currently delivering. “Not only does this create a strong reason to invest in this sector for basic supply and demand reasons, it is also comforting to know your investment is going towards the resolution of a very pressing issue for elderly people in the UK,” says Shepherd. Knight Wood is assuring investors 10% per year on monthly rentals, full management services, and no hidden fees. “Of course investors can sell their unit at any time on the open market but for simplicity the developer offers a guarantee buy back in 5 years time at 110% of purchase price,” he finishes.

Knight Wood Assets

Commercially, self-storage and hotels with unique selling points are popular alternatives too. Hong Kong isn’t alone in its trend to smaller flats and leaner offices, making self-storage a strong investment option that’s also relatively easy to manage and operate once basic criteria are met (chief among them security). But resort properties within hotels are a perennial favourite in light of burgeoning tourism markets in China, India and the Middle East. Growing in tandem is the trend to responsible travel among millennials in those same markets, already established in Europe and North America. “Nila Resort is definitely a very unique and specific investment,” begins Nila’s Youri Gliere, a truly sustainable Indonesian property. “Our offer combines a financially attractive investment, the pleasure to enjoy luxury bungalows and discover Sumba two weeks per year and participation in a new sustainable tourism model to protect Sumba’s culture and environment … This challenge on its own makes Nila Resort an alternative investment to standard homes and offices.”

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Resorts are among the most common commercial investments in real estate for individual consumers, and most potential buyers know what to expect (especially from branded products). What pushes Nila into alternatives is its commitment to real sustainability. “So far ‘eco’ or ‘green’ has been used more for marketing purposes than for real sustainability considerations,” says Gliere. Similar projects have sprung up in the past (Vietnam’s Con Dao Island, Song Saa in Cambodia) but sustainable investments are still rare. At Nila, Sumba culture will be at the forefront of design and construction, environmental impact will be minimised through use of renewable energies and carbon offset practices, drastic waste reduction and recycling (plastics will go into new roads), and empowerment of the local population through training and business cooperation. Gliere: “Nila Resort aims to become a model for future resorts and hotels in Sumba by showing that excellence and comfort can be reached by respecting nature, promoting traditions, using local materials and employing local staff.”

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