Shipshape

JUST an hour south-west of London, in the upper reaches of the Hamble River, hundreds of little masts gently bob up and down in Swanwick marina. “You’ve got to think of it as a car park on water,” explains Rupert Boissier of Premier Marinas, which looks after this and seven other marinas dotted along the south coast, Britain’s sailing mecca. With 5,170 berths, each rented out for several thousand pounds a year, the group of marinas generates lots of cash. Its owner, a property fund run by BlackRock, the world’s biggest asset manager, has also been able to increase its value, by upgrading space used for building boats (yielding £4 per square foot in rent) into shops and offices (£16 per square foot). The marinas even have planning permission for residential units on some of their 385 acres of land and water. But the most attractive aspect of the investment, according to Marcus Sperber of BlackRock, is the finite supply of coastline and building permits: only two marinas have been built on Britain’s south coast over the past 15 years.

BlackRock, which manages $23 billion of property around the world, is better known for buying offices in New York than marinas in Hampshire. But as capital has flooded into property in search of decent yields, the obvious investments are starting to look relatively expensive again. Hence the hunt for “alternative properties” such as Swanwick marina. These are outside the conventional property classes (office, retail and industrial) and include things like student housing, data centres and casinos. BlackRock owns 150 British doctors’ surgeries, for instance. AXA Real Estate, the property arm of a French insurer, manages over €2 billion worth of alternative properties in Europe, including 82 hotels, police stations in Sweden, care homes in Germany, petrol stations in Spain and data centres in several countries.

Returns have been good: in America, alternative property has outperformed the conventional sort by nearly 5% a year over the past decade. And whereas returns from offices and shops twist and turn in the economic winds (London office values sank by 40% and rents by 30% in 2008-09), many of these alternative properties are more recession-proof (people continue to need doctors and petrol, after all).

Alternative property’s share in the portfolios of American real estate investment trusts (REITS) has nearly doubled since 2000 to 32%, according to JPMorgan Chase. In Europe such markets are still relatively unexploited, says Paul Jayasingha of Towers Watson, an advisory firm, making it an attractive destination for American, Middle Eastern and Asian money.

But it is not all plain sailing. These assets often require specialised knowledge of the sector. The average pension-fund manager, deprived of benchmarks and consultancy reports, may decide to give them a wide berth. They can also be hard to invest in at scale: the Qatari-led group that is currently buying the Canary Wharf complex, a cluster of skyscrapers in London, for $4 billion would have to spend a lot of time and effort piecing together a portfolio of petrol stations worth that much.