Synergy Asset Management is a Geneva-based family office that manages money for several high net worth families in the Middle East and Europe. In 2008, Synergy, together with some private investors, set up the Landmark Real Estate Fund, a Swiss-based property investment fund that aims to provide solid, low-risk, steady returns in commercial and residential investment opportunities in Switzerland and other parts of Europe.
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Real estate is a great asset, as long as you respect the fundamentals of location, quality of construction and sensible leveraging.
Issam Kabbani, Chief Executive of Landmark, is a strong believer that property should be a key part of an investor’s portfolio as part of a medium to long-term investment strategy. “Overall, we recommend that investors hold between 20 and 30 per cent of their capital in yield-bearing real estate assets as opposed to new real estate developments. We propose a mix between residential and commercial properties yielding between 4 per cent and 8 per cent in exceptional cases. Investors who can afford more risk and a higher return can have the option of participating in new developments, yielding between 25 per cent to 50 per cent on capital.”
Over the past year, Mr Kabbani has noticed a huge increase in investor interest in Swiss property, as part of the flight to quality. “It was interesting to see that while many other markets were affected by the crisis, the Swiss market came off quite lightly. In Switzerland, we hardly registered any drop in prices – on the contrary, we have had more bidders than before on properties that were for sale than we normally would have.”
Today, however, Mr Kabbani thinks investors have become much more prudent. “I think following the crash many investors have gone back to fundamentals,” he says. “Real estate is a great asset, as long as you respect the fundamentals of location, quality of construction and sensible leveraging. But these were all forgotten during the bubble.”
Mr Kabbani places a huge emphasis on the importance of local information and local partners. “On a given block in Geneva, you might have one or two buildings that are always in demand and generate a great yield but 50 yards down the street it doesn’t work and it’s completely different. This is true in all property markets. You need to have local alliances, otherwise you are exposing yourself to big risks.”
International investors also need to be aware of the impact of currency fluctuations. For example, dollar-based investors buying in Switzerland, who did not hedge their currency exposure, will have been hurt badly in the past year by the depreciation of the Swiss franc.