Real estate still carries the negative associations of the sub prime debt, which was one of the underlying factors behind the global financial crisis in 2008. But there are signs that the sector is being rehabilitated as investors return, drawn by the potential for both income and capital gain.
A prime location is one like Covent Garden in London, whose relatively small Apple store (pictured) is the most profitable in the world for the company, or certain shopping malls in Brazil, which are creating a high-value concept which happens to be delivered through real estate.
“We try to identify the right people, with the right assets, at the right price. It is the people doing deals which inform the investment process. We still have to “kick the bricks” and travel and network.”
But it also has to be at the right price. She like Unibail in France, a firm which has assets all over Europe, and Lendlease, a relatively unknown company focused on the Sydney harbour area in Australia.
Her valuation is derived from the company balance sheet, the visibility of cashflow and a view on deviation from intrinsic value. “Even in a downturn there are some exceptional companies who show vision, like Shaftsbury in London, which managed to produce 8.5% rental growth in 2009 when all other firms in the sector were stagnating.”
Tiltman’s portfolio holds 46 stocks, drawn from a universe of 2,500 companies. She uses the Holts screening system, which throws up about 650 companies initially, and then adds in factors like liquidity and corporate governance, to produce a prospective buy list of 40-60 stocks.
“We like to be supportive shareholders, and tend to hold a stock for three to five years, buying 1.5% stake and scaling up to 3% depending on the company. We are agnostic on sectors, but we need a certain level of diversification and we are benchmark-aware, but don’t follow it slavishly.”