Why we are extending into Southern Europe now.

A short letter from the principals on cost basis, currency, generational transitions, and the case for a measured platform in Spain and Italy.

We have spent twenty-five years operating in London. The question we are most often asked, in the year now passing, is why we have chosen to extend the practice into Spain and Italy, and why we have chosen to do so at this particular point in the cycle.

On cost basis

The first answer is unfashionable: we are entering markets in which the cost basis on the assets we want to hold has stopped compressing. That is the whole of the technical case. Everything else is a footnote.

On currency

The second answer is structural. We have spent twenty-five years collecting rents and paying tradesmen in pounds sterling; we are now learning to do the same in euros. A practice that earns its income in more than one currency, and pays its bills in more than one, holds up better through the years in which any single currency does not. We are not chasing the highest local return. We are building something that survives the long stretches when one part of the world is harder to work in than another.

On generational transitions

The third answer is the least quantifiable and, in the long run, the most consequential. A material share of the assets we are interested in are held by families approaching a generational transition. The negotiation is patient, the diligence is archival, and the price-discovery process is slower than the institutional comparable. That suits us.

On timing

Why now: because the prices on the buildings we want have stopped running away from us, because working in euros is a discipline we are ready to take on, and because the families we are speaking with are arriving at their decisions on a schedule of their own — one that does not wait for the wider economy. We will write again when there is something tangible to report.

With our regards, The principals.