Higasa Club pandemic resistant
One can multiply arguments proving potential profits to convince to invest, basing them on simulations and calculations, but only time will tell whether these assumptions really survived the reality check and clash with market realities. Currently, the global pandemic affects almost every person and has an impact on the vast majority of spheres of life. While maintaining the greatest possible objectivity, I can proudly admit that when so many people experience a crisis directly, all of main assumptions of Higasa Club still stand. The solutions we have been proposing for years are highly resistant to crisis. We will not completely avoid its effects, but the impact is significantly limited. Now you can verify it not by simulation but in life – writes Marcin Rudziński, a member of the Higasa Properties Board.
The pandemic exerts an impact on many sectors of the economy, the stock market, but also on alternative investment methods, in particular on the condo hotel market which is directly related to the tourism industry. When advising our customers, also in our previous publications on this blog, we drew attention to the risks of investing in such facilities. For clarity – we never discouraged; we pointed out elements worth considering when calculating the risk. Profit decreases can also be seen in flats or apartments for short-term rental. The #StayAtHome action, government regulations, no weekend trips, restricted business trips will paralyze the hotel industry for some time still. Large shopping centres have not been operating for weeks.
Despite the generally prevailing pessimistic economic atmosphere, Higasa Club customers are doing well. Why is it so? As a part of our proprietary model, from the very beginning, we focus on basic consumer needs. We make it possible for our customers to invest in facilities with an area below 2000 m2, i.e. those that function during the pandemic. These are facilities located close to households, which enable quick shopping without exposure to numerous people-to-people contacts. In addition, the main tenants are food retail or drugstore chains, i.e. those that provide the necessities during quarantine, important from the point of view of maintaining good health and reducing the effects of the virus itself. In addition, these are products that cannot be abandoned not only in the time of pandemic but also because of the usual decline in household income or the economic crisis. The question is – what will the consumers give up faster: eating and maintaining proper hygiene, or going on a trip, buying another pair of shoes or jewellery? If anyone had doubts, the coronavirus gave the answer to this question, which we have been asking investors in Higasa Properties for several years.
In our parks we are guided by a special selection of locations. The facilities are located in the immediate vicinity or close to large housing estates, which often are the main districts of the cities. When it is recommended to leave the house only to meet basic needs, it is best to go to a local small shop, where we have contact with fewer people than to the gallery or hypermarket.
If government restrictions were to increase and, for example, the possibility of free movement around the country was limited – i.e. because of the closure of regions, then also the location of our parks at housing estates in large cities, on access roads, or in the direct commercial environment of a given city would determine the strength of this project. Fortunately, however, there are many indications that such restrictions will not be necessary this time.
When creating the Higasa Club model, we made sure that rental rates in our parks were not deliberately inflated as it is in shopping centres, so that tenants could calmly pay their liabilities, even at temporarily weaker turnover.
In addition, when preparing the business plan, we have taken into consideration even the possibility of exit or bankruptcy of one of the tenants, which would potentially result in a 20-30% decrease in revenues. According to the model, we could still handle liabilities to our investors as a part of the Higasa Club. The proof of safety and confirmation of the above assumptions is another April payment of interest resulting from the loan agreement to all Higasa Club customers.
A global pandemic will change our lives forever. According to experts, one of the fastest noticeable trends will be a shift from consumerism to conscious accumulation of savings. We have been advocating and urging this approach for years. And for years we have encouraged our customers to invest safely in commercial real estate as one of the most reasonable solutions.Back