Not For Sale

At the North-Eastern tip of the North Sound of Grand Cayman is the popular vacation home area of Cayman Kai. It has been a property hotspot for decades, with many curious visitors interested in buying properties.

Many of the homes on the most prime beachfront spots are quaint cottages built in the 1980s, often with cute hand-carved wooden signs with funny names for the homes. One such house is literally called: “Not for Sale”. Clearly a message being given to curious passers-by!

Now, as we began to recover from Hurricane Ivan in 2004, I started to look at opportunities in my role as Commercial Director for a family-owned business with deep roots in property development. Such companies always have a “land bank” of sites for the future, but through the 1990s and early 200s, prime real estate in Grand Cayman had become not only priced high, the best was also literally “Not for Sale”, so we never considered approaching the owners to look to make deals.

The key shift we made in 2005 in our thinking was to look at the map of Grand Cayman and review what parcels of land we felt we really wanted for our land bank, then to approach the owners and ask if they were open to selling. From this, we were able to make some key deals that would simply not have been possible prior.

The uncertainty created by the massive damage from the Hurricane created openings that we, with a strong Balance Sheet, stepped into, creating long term value for the business.

“Be fearful when others are greedy and greedy when others are fearful.”

Warren Buffet

So, today a few tips for those ready to look over the uncertainty of how we gradually emerge from lockdown, to look ahead bravely to value creation 12, 18, 24 months and more down the line.

Tips for those ready when things move from being “Not for Sale”:

• Build your War chest. Do what you can to shore up your Balance Sheet. Assuming it is already strong, look to how you can leverage this to raise finance to have a “war chest” to make acquisitions
• What may be “For Sale”? Joseph Schumpeter’s theory of creative destruction refers to, in part, the mutation of economic structures from within. At a micro level, some businesses that you would have loved to acquire may have been “not for sale”, but for one or more reasons may suddenly become “for sale”
• Be long term in your approach. While so many are focussed on the short term, even a 3-to-5-year horizon may seem long. Try looking at a 10-year investment horizon and you will stand out from the crowd. This enables you to look at both long term opportunities and long term financing. What acquisition targets will pay off most long term? (eg renewal power vs carbon-based if you are in the energy sector!). How will you finance this? (eg debt finance will be historically very inexpensive in the next year or so, so perhaps consider using your Balance Sheet to lock in 10+ year finance)
• Be Proactive. You’ve set up your war chest, done your research, looked long term. Now, be proactive. There will be many businesses out there stuck in short term thinking that have not yet shifted their mind to selling out. Be the proactive investor who approaches them.
• Leave something on the table. This is a personal approach. In decades of appraising and making investments, in many, many deals, I have always looked to make every deal a win-win. In decades of making deals, I’ve never and will never look to squeeze every drop out of a deal. I’m already seeing some plain nasty behaviour coming through, people opportunistically using the pandemic to screw people, eg a case of someone threatening to pull out of a long agreed property sale unless the vendor would take 20% less “because of Covid”, as if the property will be worth 20% less in the long term. Plain nasty. Be a human.

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”

Maya Angelou

This is a time of great opportunity for those willing to look at what has historically been “not for sale”. I hope these tips enable you to find and realise such value for yourself and your business.

Oh, and I love looking at such things with people, do call me to talk through opportunities.