Last week we spoke about how many businesses don't want to own their own real estate, but that some do. We then spoke about Prada's recent acquisition of 720 and 724 Fifth Avenue for $835 million. However, they're not the only ones. According to New York's The Real Deal (thank you John Bell for the article), last year saw the following transactions:
Swiss fashion house Akris bought a property from SL Green for $40.6 million
Japanese coffee retailer Geshary bought a property on Fifth Avenue from the Riese Organization for $38 million
And Dyson bought a building in Soho for $60 million
Now, some, or a lot of this, is strategic. New York is New York, and global brands need to be there. Another part of this is that there was less competition last year. Fewer real estate companies wanted to buy retail and office buildings, and so end users seem to have stepped in at what they presumably saw as favourable prices.
But it's also not totally foreign for retailers to want to own their own real estate. Perhaps the most famous example is McDonald's, which owns its own real estate and then leases it out to franchisees. Though as I alluded to last week, it's important to know what business you're ultimately in. And McDonald's knows it's in the real estate business.
Earlier this week the Wall Street Journal published an article claiming that the celebrated venture capital firm Andreessen Horowitz was lagging behind its elite peers in terms of returns.
The firm then responded with a well-written blog post explaining why this accusation is off the mark. Their response was simply that you can’t measure returns on “unrealized gains.” Until there is a liquidity event – that is, the company gets sold or goes public – it’s just paper returns. And what matters is cash.
As the post clearly states: “I can’t spend unrealized gains.”
But beyond just a rebuttal, the blog post is a great primer on how the venture capital industry works. We talk a lot about the tech space on this blog, so I thought some of you might find it interesting.
One of the reasons I like to follow the VC space is that there are many similarities to real estate development. Not only in the way that the funds are structured, but also in the way that the gestation periods are incredibly long.