Where to next?

As South Hill Capital enters its seventh year in business, a year which is sure to be the most politically and economically turbulent of recent times, the question that has become most pressing for our board and investors alike is “where to next?”

We continue to monitor the market in central Dublin, and indeed remain heavily invested in the city. Yet, as the Brexit related corporate relocations continue apace and a relatively weak Euro draws FDI to the area, prices are being pushed far beyond where we see value.

Similarly, central London, historically a core element of our portfolio, is not experiencing the downward pressure on pricing that we would have expected, despite the current economic uncertainty. Loose monetary policy is propping up the price of all asset classes and compressing yields on income investments.

In previous years, we have looked further afield, primarily in Eastern Europe, for higher risk opportunities to complement our prime, city-centre investments. However, such prospects become exponentially riskier given the European Union’s myriad of economic and political problems and the returns on offer do not account for this.

How then can we ensure that the next seven years are as fruitful as the first seven? While the obvious answer is to find a new market offering similar potential and risk-adjusted returns to London in 2010 or Dublin in 2012, the truth is sadly a little less straight forward.

The global macroeconomic landscape after the financial crisis was unique. Never before had property prices fallen as suddenly and as dramatically in the UK and in Ireland. This means of course that finding similar markets with equivalent investment opportunities will be nigh on impossible, especially in an era of “free money”.

The only way to continue as a stand out investment house is to forsake the top down investment model in favour of a bottom up strategy. We will no longer be picking markets that we like but particular assets to fit our long term strategy. This means that we will be working over a few geographies and asset classes but will ensure that our returns remain consistent without pushing ourselves up the risk curve.

We have a few assets in our sights and will of course publish details as and when the deals close.