value proposition

Real Estate Investors From All Countries and regions Flock To This Location…

As one of the most moribund housing markets in Europe, Spain has become a magnet for global bargain hunters. Real estate prices are down as much as 50 percent from their peak during a housing bubble, and investors from Asia to the United States and Britain are flocking to Spain to try to catch the uptick.

British Airways flights to Madrid are packed with London-based real estate executives. The hedge fund Baupost is buying shopping centers, Goldman Sachs and Blackstone are buying apartments in Madrid, and Paulson & Company and George Soros’s fund are anchor investors in a publicly listed Spanish real estate investment vehicle. Kohlberg Kravis Roberts just bought a stake in a Spanish amusement park complex. Big-name private equity firms and banks are teaming up with and competing against one another on huge loan portfolios with names like Project Hercules and Project Octopus.

“It’s surreal,” said Dilip Khullar, a 25-year veteran of Spanish real estate investing and director of Cadena, an investment fund. “One day it’s the worst place in the world to buy real estate and the next, it’s the best.”

The end of Spain’s real estate boom left unfinished projects like chalets at Cala Romantica on the island of Majorca.Enrique Calvo/ReutersThe end of Spain’s real estate boom left unfinished projects like chalets at Cala Romantica on the island of Majorca.

Low interest rates, set by the European Central Bank to help buoy Germany’s market, helped to fuel Spain’s housing boom. Real estate developers teamed up with local savings banks to borrow and build over and over again. “We were a train going 200 kilometers an hour and it was hard to stop,” said Jaime Pascual-Sanchiz de la Serna, executive director at Aguirre Newman, a leading real estate consulting firm. Construction reached a staggering 12 percent of gross domestic product, more than double the proportion in Britain or France.

When the bubble burst in 2008, Spain became toxic. “Nobody wanted to invest a penny in real estate,” said Mr. Pascual-Sanchiz de la Serna. “Spain was overbuilt and it was going to take 10 years to work through.”

It hasn’t taken that long.

The real estate market started to revive in 2013. Government reforms, including a relaxation of labor laws and stricter rules for banks related to accounting for bad real estate, meant that banks could no longer ignore the assets on their balance sheets. Once the banks had to hold more capital — in some cases drastically more — they started to think it was better to sell, analysts and bankers said.

Spain’s “bad bank,” called Sareb, formed in 2012 with the real estate assets of the country’s bailed-out banks, started to close deals. Separately, last July, Blackstone bought 1,860 apartments for 125.5 million euros, then about $166 million, and in August, Goldman bought a block of public housing in central Madrid. This combination of deals set a floor price, analysts said.

The recovery is still nascent. About €5 billion worth of real estate transactions took place last year, according to the consulting firm CBRE Spain — more than double the amount of the previous year but still small compared with the €166 billion in commercial real estate deals made in Europe last year. At the peak, Spain issued 120,000 mortgages a quarter; in the fourth quarter of 2013, the figure was 15,000. Fitch Ratings recently issued a report saying that real estate prices would continue to fall through 2014, not rebounding until 2015.

A housing block in Cancelada, in southern Spain. Many such assets from bailed-out banks went to a so-called bad bank, Sareb, which is gradually selling them off.Jon Nazca/ReutersA housing block in Cancelada, in southern Spain. Many such assets from bailed-out banks went to a so-called bad bank, Sareb, which is gradually selling them off.

And Spain’s economy continues to struggle. The unemployment rate is 26 percent, and growth is estimated to be about 1 percent this year. The government contends things are better, said Pedro Gonzalez, a former shopkeeper who now drives a taxi, but the people haven’t seen it. “There are no jobs,” he added.

But that looks like an opportunity to investors who believe the market will truly take off and want to get in before it does.

“It’s crazy the number of investors coming in,” said Fernando Acuña, co-founder of Aura, a start-up real estate advisory firm in Spain, as he toggled between multiple screens dissecting data in the residential real estate market and showing the uptick in Google searches for “comprar piso” — “buy an apartment” — in his bustling office on Madrid’s fashionable Almirante Street.

Small firms like Mr. Acuña’s, midsize investment banks in Spain and global banks in London are buzzing with investors looking for different ways to play the real estate market, by buying apartments or office buildings, scooping up loans from Sareb or the banks themselves, creating pools of capital to buy real estate assets or buying servicing platforms, which give the private equity firms that own them the ability to manage their assets as well as critical market intelligence.

Belén Romana, chairwoman of Sareb, said the number of investors — around 50 — who turned up for the first auctions surprised her. They were aggressive, she said. “It was early and they thought they could make a killing.” They pushed her to move fast and do deals. “They wanted to sit in a dark room and do a bilateral deal,” she said. She refused. Auction processes were put in place, with data rooms for deal teams and deadlines for nonbinding and binding deals.

In 2013, Sareb sold €1.5 billion of the €51 billion in assets it was created to sell. Of the €51 billion, about 20 percent is real estate and 80 percent are loans. Ms. Romana said the agency bought the assets at discounts of 40 percent to 80 percent.

Unfinished homes in Cancelada, Spain. The nation’s economy continues to struggle, with the unemployment rate at 26 percent.Jon Nazca/ReutersUnfinished homes in Cancelada, Spain. The nation’s economy continues to struggle, with the unemployment rate at 26 percent.

There is a lot to sell. Sareb aims to sell nearly 10,500 assets this year, and the top six Spanish banks hold an additional €159 billion worth of real estate and development loans, according to a Goldman Sachs research report.

Catalunya Bank has just received bids for Project Hercules, a €6.95 billion portfolio of residential home loans, 43 percent of which are nonperforming, or overdue by at least 90 days. The bidders are a who’s who of private equity: Blackstone and TPG are competing against teams of Goldman Sachs and Cerberus; Apollo and Centerbridge; and Deutsche Bank, Pimco and Marathon, according to a person briefed on the sale.

Commerzbank recently sold €4.4 billion of loans backed by commercial real estate in a separate deal called Project Octopus, in which Lone Star and JPMorgan Chase beat out Blackstone and Deutsche Bank. The price was not disclosed but market participants said the sale was made at close to a 30 percent discount.

In February, a Socimi, or Spanish real estate investment trust, came to market, raising $547 million. Two weeks later, Hispania Activos, another pool of capital, raised $763 million, with Paulson & Company, George Soros’s Quantum fund and Moore Capital as anchor investors.

Before Grupo Azora, the Spanish real estate company behind Hispania, decided in the early fall on an initial public offering, some of the bankers its executives spoke with wondered whether there would be ample demand. But by the time the deal was marketed, investors were jockeying to get a piece of the action.

“We generated demand of $2.3 billion,” said Juan del Rivero, chairman of Grupo Azora and a former Goldman Sachs partner. “In my 30 years of experience in investment banking, I haven’t seen a lot of books like that,” he said, referring to the process in which investment bankers take orders for a deal before pricing it.

More Socimis are in the pipeline, with at least one set to raise more than €1 billion.

Already the deal landscape is changing. While many investors want trophy commercial real estate assets, extremely few are for sale in prime areas of Madrid and Barcelona. Investors who hoped for 20 percent internal rates of return are now expecting 12 percent to 15 percent, and shifting their focus to residential properties, analysts said.

That shift suits Mr. Acuña of Aura very well. He has ridden the boom and bust of the real estate cycle and is gearing up for the next boom.

In 2006, Deutsche Bank hired him to build its mortgage business. When the market collapsed, he added the title of head of collections. In 2009, he started a business trying to sell repossessed houses for the banks and formed a database with 450,000 properties from banks and more than a million from private clients. When investors started calling and asked him for valuations of land, houses, buildings and portfolios, he started Aura to advise them and also to invest in the sector. Its website is in English because, he said, “all my clients are in Mayfair.”

“I think 2014 is the year we will see a lot of transactions,” he added.

Many worry that the competition for some assets and excess liquidity is driving prices higher.

“People are starting to overpay on certain assets,” said one investment banker who spoke on the condition of anonymity because he works with many of the funds active in the market. “There’s pressure from investment committees in London to do deals.”

One private equity executive said a recent auction for a mediocre office building attracted 30 bids. His company’s bid — which he said was fully priced — did not even make it past the first round.

Are prices too high? “That’s the million-dollar question,” said Javier Martinez-Piqueras, co-head of equity capital markets at UBS. “Actually, it’s the billion-dollar question.”

 

REFERENCE THE NEW YORK TIMES PUBLICATION


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Building A Brand In The PPC / PPL Era

Brands Built On A Unique Value Proposition, Not Price And Promotion, Stand The Test Of Time

No matter how hard anyone tries to convince themselves, the same people who look at their computer screens or smart phones today are the same people who would have spent that same time watching TV or listening to the radio, a few years back. They react the same way and internalize information the same way.

So the base a brand is targeting today is pretty much the same it used to target ten years ago. Except the channels for delivering the message have evolved.

Building a solid brand has always required the application of fundamental building blocks. Thinking, strategies and activities that have stood the test of time and remain central to this day.

The challenges of building a powerful brand like Coca Cola, BMW and other mega brands include the relative shortage of marketing professionals with the background and experience that can only be cultivated around the offices and boardroom tables of marketing giants like these and the multi-national advertising agencies that service them.

Knowledge imparted throughout these organizations represents many, many decades of experience, trial, error and learning. You just don’t weave your way around this kind of experience coming out of university with a marketing degree. Or a diploma that may be taught by individuals who do not have the depth of a proven brand builder who spent decades building mega brands around the world.

Today’s PPC (Pay Per Click) driven thinking, combined with widespread lack of deep marketing experience, compounded by an instant gratification generation and mentality are making it extremely hard to build true brands and brand equity.

PPL (Pay Per Lead) has now gained serious traction too. A click through is no longer enough as a measure of campaign ROI. Marketers are calculating and evaluating an advertising medium based on cost per lead, or even conversion. If I don’t sell this many tools, then your medium doesn’t work!

The worst part is that as marketers we tend to forget that the concepts we create and the ideas we generate are critical to advertising and marketing results. Click throughs, lead capture and conversion.

At ListedBy.com, a growing online real estate auctions marketplace, we constantly remind ourselves of these basic fundamentals as we work to build the next mega real estate venue on the Web.

A new age marketer, reporting to a superior who relies on the young professional’s ‘knowledge’ of new Web technologies and trends,  may find it easy to default to blaming the advertising medium or channel, before they look internally at their own work. Like their landing pages, lead capture incentives or their lead incubation and conversion systems.

This spells trouble for the brand and the organization over the long haul.

Unless we put a stop to promotion driven PPC / PPL advertising and focus on messages that build brands, we will continue to drive our brands and sales primarily based on price and events. That is a recipe for failure. And often, disaster.

Price and promotion driven marketing is the antithesis to building a brand that stands for value – and the test of time.

 

 

 

Unlock Your Unique Value Proposition (Part 2)

Everyone would like to have a powerful and effective Unique Value Proposition. This article offers steps to guide you through the process.

Getting a clear understanding of what a “Unique Value Proposition” is can be very helpful, but pinning yours down can be quite the task.

Typically, an advertising agency is the best route to get such work done. In reality though, most REALTORS® may not have, or wish to commit the resources to undertake such an exercise.

This article is a relatively simple step by step guide to help you pin down an advertising promise that makes your brand stand out through an effective benefit oriented promise.

In the first article of this series, we described the term “Unique Value Proposition” as your market edge. Technically, that it is a sentence or paragraph that captures and describes the unique benefit your solution offers to a target audience and that ideally addresses an opportunity or pain point they face. The ultimate value proposition will not elaborate on the pain but rather focus entirely on the benefit you bring to the table. People buy benefits, not problems.

Step #1 – Identify a group of 10 – 20 people willing to give you unbiased, genuine feedback. Current and former clients are what you need (not friends or family members). Give this audience a good incentive to provide you with their genuine and real feedback. Gift cards or a drawing to win an iPad or camera may do the trick.

Let them know that:

  • You need their input for an important branding exercise for your business
  • That their candid and genuine input is crucial
  • That there are no right or wrong answers. That all answers are critical to the exercise, and that what think may be bad input can be the best input they have, and the other way around. This is key.

Step #2 – Create a list of one or two-word attributes that describe a great REALTOR® or their services. Then email, fax, or drop off the forms to just half of your research group and ask them to rank the attributes.

Here is an example:

Please rank, in order, the most important attributes you look for in choosing a REALTOR®.

Note that you should not include more than ten attributes. Following are some suggestions but by no means yoou don’t have to use those. You know best what should go on the list. Just make sure the suggested attributes are not biased or self-serving. You want a solid, true exercise you can learn from and use to effectively reposition your business.

1) Honesty
2) Neighborhood knowledge
3) Efficiency and productivity
4) Speed of service/responsiveness
5) Negotiation skills
6) Etc. etc. etc.

Step #3 – Ask your research base, in the same document, to write your name next to any three of the attributes they believe you genuinely represent.
Once you’ve collected and analyzed the responses, you will have a list that highlights the attributes your market values most in a REALTOR®, and, from this first group, which of the top ranked attributes they think you represent. You may be surprised by the findings, but this is what the exercise is all about.

Armed with a clean sheet and new information, hand the top attributes ranked by the first group, from most important to least important, to the second half of your research audience and ask them to put your name next to three of any of the descriptors. The objective is to further validate the findings that came out of the first group exercise.

While there will still be more work to do following the discovery phase, you will have reached a point where your advertising and messaging can begin to tackle criteria you know will hit a cord in your marketplace and that genuinely position you as a stand out advisor.

Use the findings intelligently to craft highly focused advertising and listing presentations. And, do NOT do what most marketers do. Resist the temptation to change things after a few months have passed. And, resist the equally destructive temptation of merging more than a single attribute into your promise.

Consistency, over time, is what creates equity and association around a brand. Repeat your message until home owners and prospective buyers in your area start to automatically suggest your name when asked for a REALTOR® who is ‘responsive’ or ‘is a very strong negotiator.’

The fun part is knowing that as you build towards this kind of strategic awareness, many of your competitors will be spinning their wheels trying to be everything to everyone.

As a final note, being associated with a #3 ranked attribute and playing up on that association in your positioning is far more powerful than trying to associate yourself with the #1 attribute that you are not that strong in. Effective market positioning is all about a relevant promise you can deliver on better than anyone else.

Not about promising something everyone else can deliver on, or worse, that others can deliver on better than you.

Unlock Your Unique Value Proposition

If you’re asking yourself this question, you’re not alone. In fact, you would be pleased to know that some ‘professional’ marketers often don’t know what it really means. Some, including a few veterans I know, give up on the concept entirely at some point in their career and pull back to focus on product or service attributes. Big mistake.

A Unique Value Proposition is your market edge. It’s a sentence or paragraph that captures and describes the unique benefit your solution offers to a specific target audience and that ideally addresses a pain point or opportunity they face.

A proposition that includes a competitive bite stands to be more successful in the marketplace than one that does not. Meaning, a solution that delivers something better than other solutions (you need to be able to prove that), is more powerful than one that does not benchmark against anything. While we’re on this aspect of a value proposition, the benchmark you compare against in your communication may even be your own ‘older’ solution that is now being replaced, if yours is the leading solution in the market or, if you cannot actually compete with others’ solutions.

Let’s also not confuse a Unique Value Proposition with a selling proposition or, selling line. We’ll make that a separate discussion in the future.

You might want to start thinking about your value proposition and write it down. That will be the first step towards more powerful communication as you focus your pitch around this promise. Don’t give up on the exercise if you find that once you start writing things down, that the process does not work out as easily as you hoped. Over time, the idea will crystallize and a strong, effective Unique Value Proposition will emerge.

Do yourself a favour though. Don’t try to pin a proposition without consulting with those who know it best – your current and former customers. This is the most important part of the process. In talking to a few of them specifically about this exercise, you should quickly realize there is a common theme that keeps emerging, and it will likely be very different than what you thought it would be. That’s what you should go for and build on. It’s what makes you or your service unique and with that, no one will be able to easily claim the same promise. For one, they’ll be looked at as a ‘me too’ pretty quickly and lose their credibility while you build brand equity around your promise.

The last point to take note of is to maintain your message consistently once you’ve established the value proposition, and resist the urge to change it whenever you introduce a new marketing campaign. Focus on it in the long run, and re-evaluate it as you go to ensure it remains competitive. It’s the repetition of the same message that will make you stand for something unique in your market. It will take time and effort. At some point, no one will be able to touch you on that particular promise, but only if you maintain your competitiveness in that specific area.