It’s all about yield. Yields don’t go up and down they move in and out. Sometimes they compress and if they’re not compressing they can be stabilising or softening. Or hardening.
Yields can be initial, equivalent, reversionary or they can be found running although not to or from anything. A running yield is basically the same as a running return but this has nothing to do with a side return. Yields can be gross but this doesn’t mean they’re ugly. We distinguish between single digit and double digit ones but we’re not talking about fingers. Development yields are more difficult to explain and equated yields are like unicorns. We are told that they exist but no one has ever seen one.
When there’s been a correction in pricing it doesn’t mean it was wrong. And you never correct up only down. Rents don’t fall they’re rebased. Rebased rents have a lower tone but they don’t make any noise. Background noise is something that Fund Managers try to ignore but it doesn’t make any noise either. Rebased rents usually end up rack but not on a rack.
Rack rented properties are not reversionary so they’re usually dry. If they’re not dry they’re not wet but they can be under water. A property that’s under water can also be messy. Some people like to get their hands dirty with messy kit but this isn’t sportswear. A property that isn’t dry probably has some meat left on the bone. It could have angles. Someone who likes properties with angles inhabits life further up the risk curve but this isn’t a place.
A strip of land can be run along but not an income strip. Perhaps a ransom strip. An asset can be stripped but this is not the same as stripping out. A runner is the same as a prospective buyer or a punter. But not the Cambridge type.
A property that’s long and strong is probably plain vanilla.
Fund managers are sort of the same as asset managers although they tend to earn more and don’t get their hands as dirty. A good asset manager makes properties sweat, a fund manager makes them perform. Being in funds doesn’t have to mean you’re a fund manager.
An investment that washes its face has probably performed. If something’s performed it has probably stacked up. If it hasn’t performed, it’s probably been a dog or a pup. Dogs never perform. A horse deal can. Getting a nibble isn’t a sign of mice.
Back to backing isn’t a celibate encounter. It’s a bit like double dipping except its legal although double dipping isn’t illegal. Nor is double running although it’s not allowed either. Nor is flying a kite. Contracts can be turned, flipped and raced. Markets turn but can’t be turned.
Tenancy schedules can be skinned but this is not the same as having skin in the game. Wrinkles and warts are not skin conditions.
A low yield means a high price and a high price means a hot price. Fire sales produce soft prices not hot prices.
And there’s no such thing as a cold price.
John Miles 17th October 2016