Words: Ashley Rigg
Published: 18th September 2008
Industry Millionaire: Colin Murphy talks to Globaledge
In the hot seat this week is Colin Murphy, founder and director of
Someplace Else Ireland, a Dublin-based emerging market specialist. Colin divides his time between Madrid and Dublin and is known to many in the industry from the variety of positions he held at Blendon Communications and The Irish Times. His views on emerging markets are
widely quoted in the UK & Irish press and he also writes an
overseas property blog.
To help our readers come up with ideas for future projects, we gave Colin a hypothetical investment pot of £25k, £100k and £1 million to invest anywhere in the world with the objective of maximizing return over a five-year period.
Ashley Rigg: Hi Colin, good to catch up again. Have you had any thoughts about where you’d invest your hypothetical millions?
Colin Murphy: Absolutely, I thought very deeply about it over my coffee and toast this morning!
AR: Good man. Here’s 25 grand – how would you spend it to maximize my return over five years?
CM: I’d probably have to go for a land investment in
Brazil,
Argentina,
Belize or
Canada.
AR: Any particular favourite?
CM: If I had to choose one it would be
Argentina. I’d look to buy sub-divided freehold land on a resort in the Cordoba region which is about an hour’s flight from Buenos Aires.
AR: Why Argentina and Cordoba specifically?
CM: Argentina is a beautiful country, the economy is doing well and it has a growing middle class. Land is cheap and interestingly it is seen by locals as a safe investment. Land holds particular appeal in a country that has suffered the financial crises that Argentina has. It’s becoming an increasingly popular asset class which means there is a good resale market.
AR: What’s Cordoba like?
CM: It’s very green with rolling valleys with many “estancias” (ranches). It’s spectacular, very popular with the middle classes.
AR: What do you get for your money?
CM: For £25k you could get about an acre of land, more with developer financing. I know some reputable developers offering 50% financing so you possibly get up to two acres.
AR: Let’s raise the stakes to £100k.
CM: I’d split the money in half, putting 50% into a second tier city in
Romania and the other 50% into
Berlin. Romania is the more exciting play. Berlin is less risky and would suit someone looking for a good long-term, low-risk investment. Customers in their forties with young kids seem to find
Berlin particularly appealing.
AR: So why Romania?
CM: It ticks a lot of boxes. It’s often lumped into the same category as Bulgaria but it has much more going for it from an investment perspective. It’s getting a lot more foreign direct investment from the EU, it’s more modern and has a bigger population. 22 million versus 7.5 million in Bulgaria, I think. Unemployment is low and the banking system is relatively untouched by the credit crunch. The mortgage market is also set to mature. I wouldn’t go for Bucharest though, I think the capital has seen the quick and easy money made already. My choices would be either Iasi (pronounced Yash) or Ploiesti (pronounced Ploh-esti). You can get one-beds in the centre of these cities for £55k to £65k with 50% to 75% finance.
AR: Loan to value rates are very low in Germany. Why invest there?
CM: That’s true, they average around 50% but the fundamentals of the market are so attractive. If you bought property in Berlin in 1998, it would be the same price today and so prices per square metre in central Berlin are 25%-30% of what they are in central London. They average around £1,300 per square metre, compared to around £7,000 per square metre in London. If you consider that Germany accounts for 27% of the EU’s GDP, there’s an imbalance between output and property prices. Over a 10-year time frame, equilibrium has to be restored.
AR: Thanks Colin, let’s finish off by taking the investment sum up to a million.
CM: With this sort of money, I’d draw up a proper plan. Half the money would go on what I consider to be low risk investments. This would include £250k investment into commercial property in
Panama City and €250,000 (£200,000) for a small apartment block in Berlin.
AR:
Adam Samuel tipped Panama too. What makes it so attractive for investment?
CM: In terms of trade, it’s one of the most important countries in the world. Cargo ships coming from China have to pass through the Panama Canal to get to New York and the East Coast of the States. With its geographical location, it’s ideally placed to do well from a recovery in both mature markets and from the ever-expanding developing markets.
There are lots of residential opportunities, Trump Tower being one of the most widely quoted, but I think commercial property represents the better investment. It’s an international business hub and tax haven so tenant demand is good. There are 120 banks there in a country the size of Ireland, it’s incredible!
AR: What are the prices like?
CM: You can buy a whole floor in the business district for £250k. Yields can be around 15% to 20%. There are some great investment opportunities - if you have the money to invest.
AR: What about the rest of the money?
CM: I’d put another £300k into medium-high-risk ventures. About half of this would go toward distressed and undervalued property in
Florida. The market is close to the bottom in my view and there are some reputable builders looking to offload units very cheaply. I recently saw a one-bed apartment on a development 10 minutes from Disney World selling for $150,000 (£86,000), less than half the value they were on the market for a few years back. There are a number of places in Florida that look appealing right now including downtown Miami and certain parts of Orlando.
With the other £150k, I’d invest in Argentina. I’d buy a two-bed apartment in the Palermo district of Buenos Aires. I’d look for something with views, ideally above the 15th floor. It’s a prime city centre destination with lots of potential. You can pick up a very decent two- bed apartment for around £100k. I’d look to invest £50k or so in a vineyard scheme in Mendoza. Some companies are offering hands-off investments with a share of the profits and some great wine to boot - sounds fine to me!
AR: What about the remaining £200k?
CM: I’d take a punt with the rest of the money. I’d put £50k each into city centre property in Cambodia, Sri Lanka, Mozambique and Zimbabwe. They’ve all got high growth potential but are high risk. You would need to go to the countries and find partners you could trust. It couldn’t be done over the telephone or on the internet.
AR: Zimbabwe is an interesting choice given the current situation. You could be throwing your money away.
CM: True, and if it was real money, I’d no doubt have to run it past my wife first but this country has enormous potential if it is run properly. International support will be huge once the current government moves on. All of these fictional £50k investments are high risk but you would only need one of them to come off to make a good profit over a five- to ten-year period.
AR: Thanks Colin, see you for a beer when you’re next over in London.
CM: Pleasure. See you soon mate.
Would you like to be an industry millionaire?
Do you have a good knowledge of a particular country or region? Could you point overseas agents and developers in the right direction when looking for partners and projects? If you’d like to participate, please contact us.
About Someplace Else Ireland
Someplace Else Ireland is an emerging market specialist based in Dublin. As a part of the Someplace Else UK LLP Group, they exclusively promote the Someplace Else suite of products to the Irish market. They also act as agents and promote a wide variety commercial, offplan, resale and development investment property in Argentina, Belize (Caribbean), Brazil, Chile, Montenegro, Panama and Romania.