In the latest edition of Prospects: Asia Pacific Real Estate Intelligence, the online magazine dedicated to commercial real estate investment in the APAC region, we explore the idea ‘cashflow is king’ for asset owners.
Valuing real estate assets is tough in a market with reduced transactions and restricted travel, however investors need data to help them refinance. Banks are becoming cautious over real estate lending but not putting borrowers under pressure. The unique challenges of the COVID-19 pandemic are driving a new focus on security of income streams: landlords need to know how if their tenants are strong enough to survive.
Martin Fidden, Regional Managing Director, Asia, Valuation & Advisory at Savills says: “Tenants are becoming more important than location or asset quality. Tenant access to liquidity and the strength of their balance sheets are crucial.
"More than ever before, investors are looking at property as a going concern rather than just a physical asset which produces a passive income. It is not just ‘location, location, location’, but rather ‘cashflow, cashflow, cashflow’.”
Savills Australia Director of Capital Advisory, Andrew Cottam, has added, "Less emphasis is being placed on typical headline property metrics such as the WALE and market cap rate. Tenant quality and their cash flow generating ability under the current economic settings is key. Any weakness around these factors will see discounting occur both from debt and equity investors on LVR and price."
For more article details, visit the Savills Prospects website.