Even In The Current Economic Climate, Fundamental Value Investing Can Create Great Spaces

The UK’s economic and political backdrop is having a huge impact on the real estate sector. To a fundamental value investor, however, this is no reason to stop business as usual. In contrast, it could be an opportunity to identify opportunities, Yoo Capital Managing Partner Lloyd Lee said.

“In the current climate there are substantial risks at play that cannot be ignored,” he said. “However, investors do have a choice: Do you do nothing, wait and see where the world goes? Or do you press on in the face of adversity? The way we see it, there is no choice. If you turn away at a headwind every time, you’ll always end up going backwards.”

Fundamental value investing focuses on opportunistic real estate that can add value to communities. No matter the economic backdrop, investing in well-placed assets that have been undermanaged and introducing creative placemaking can transform an area — and bring the necessary returns. London, in particular, is where investors can find many of these opportunities, Lee said.

“London is a gateway city, a safe environment,” he said. “It has a stable government, despite current turbulence. It is a time-tested market with 1,000 years of longevity, decades of liquidity and strong occupier and tourist demand. Those factors are not going anywhere.”

The structure of Yoo Capital puts it in a strong position to make the most of opportunities, Lee said. The team has the full skill set needed to drive projects in-house, which allows it to go after many types of opportunities, from transitional income to refurbishment projects and full regeneration schemes.

One of Yoo Capital’s most high-profile projects has been the regeneration of Olympia London. The events venue and surrounding area are being transformed. Lee said it is a testament to the strength of London, as well as Yoo Capital’s partners, that the project is now 24 months from delivery despite the challenges of the last two years.

“We have the world’s most robust, committed partners,” he said. “Retail and leisure properties are all let, having attracted huge interest. Global businesses have seen the conviction we have with investors that London is again leading the way.”

Olympia London will bring together many commercial real estate classes, including office space, hotels, retail and leisure. This is part of Yoo Capital’s vision that real estate needs to work harder today and deliver more.

“This is the definition of a great mixed-use place,” Lee said. “Real estate today must help us live, work, travel and present a brand at work. London has a powerful position to lead the way for other gateway cities. Big companies like working with us because we’re reinventing great communities, which allows you to do something interesting.”

Doing something interesting includes creating spaces that can be adapted as society’s needs change, Lee said. Yoo Capital aims to create places that have long-term demand as well as adaptive reuse potential, with flexibility built in.

“We create great places today with the confidence that in 20 years’ time, they will still be great,” he said. “This is because the fundamentals of what makes London an excellent place will remain.”

To achieve improvement goals, any approach to development needs to incorporate social value from the outset, Lee said. Yoo Capital is redeveloping Shepherd’s Bush Market, which it bought in 2020. The project included working with stallholders through the pandemic, including freezing rent until 2031, and collating ideas for long-term investment.

The project is being designed with the history of the area in mind. However, Yoo Capital is also looking to ensure the area keeps pace with the rest of London.

“Not many people highlight and polish the heritage that’s there; they try to paste over it,” he said. “But the most interesting way to develop is to dig into the history of what makes a place and come up with a new chapter. You can do that where there is a certain level of demand and find new community members who want to be written into that chapter.”

Yoo Capital consulted with local residents to ask what the area needed, and the clear answer was more affordable housing. As a result, the company has committed to building 100% affordable housing around the scheme. It is also speaking to major institutions about opportunities to bring sectors such as life sciences to the area.

Lee said he is confident that Yoo Capital will find more opportunities in the coming years, despite the rocky economic landscape. The firm’s vision for what London can offer remains.

“In our firm, the average tenure is 24 years,” he said. “Many of us have been through three property cycles. We’ve seen it before. You can’t execute a long-term strategy if you don’t have a robust position that allows you to withstand turbulence.”

This article was produced in collaboration between Yoo Capital and Studio B. Bisnow news staff was not involved in the production of this content.

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