Cobalt news
Goodbye 2008 Hello 2009 – Infrastructure and Real Estate Finance Christmas Letter
05/12/2008
First things first; Merry Christmas and a (slightly premature) Happy New Year from Cobalt. It’s been some time since we last wanted a year to be over as much as this one but thankfully 2008 is almost done and we can start to think about what 2009 will bring in terms of opportunities in the infrastructure and real estate finance sectors.
There’s little point in pretending that 2009 isn’t going to be difficult. It will take more than a change in the White House and a New Year to repair the World’s financial markets. However, we are starting to see the opportunities that naturally result from what has been a fundamental dislocation of the market and therefore we expect 2009 to be more positive than 2008 for those with the right skills and experience.
On the real estate finance side there are few loan books that will not require a significant degree of restructuring and workouts and this will create opportunities for those flexible enough to adapt their skills. As banks gradually get to grips with their portfolios, investors with cash will increasingly move to take advantage of bargains and this will lead to further opportunities on the buy-side, initially for those able to originate investment opportunities and then for structurers and execution specialists to support them. There will be limited opportunities for originators and we’re in a fortunate position at Cobalt in that we know where these will arise but the criteria attached to these positions are likely to be stricter than ever given that it will be a buyers’ market.
Within infrastructure we anticipate selective hires by both fund and advisory teams as many have a reasonable pipeline but have not hired to the extent that they might have in 2008. In addition we have already seen increased demand for those able to raise equity or source and structure debt for infrastructure deals as the availability of capital has tightened. This is the key to whether or not the sector will see significant activity next year as there is no denying the need for new infrastructure to be developed globally and the appetite that Western governments have for spending their way out of the downturn. However, these positive pressures will need to be met by equity and debt being made available by the market in order for them to make any real difference. As a result we expect to see continued demand for equity-raisers and infrastructure debt structuring/restructuring specialists
Away from Europe we will be open for business in Abu Dhabi in early 2009 and having spent much of 2008 developing our coverage of the MENA market we are confident that there will be plenty of opportunities in the region. The situation has changed somewhat in that Dubai is due a correction and Gulf institutions in general can hire the very best without offering the packages that would have been necessary two years ago. However, there will continue to be development away from Dubai and the relatively high level of liquidity in the region will mean that the major players will be better placed to drive local growth and take advantage of Global investment opportunities than those elsewhere.
In summary, 2009 will be tough but the green shoots of recovery will start to appear and there will be opportunities for those who are flexible and adaptable. The Finance Team at Cobalt will endeavour to stay ahead of the market and we’re confident that we’ll have a much better understanding of the market and, more importantly, where the opportunities exist within it than our competitors.