MINDING YOUR OWN BUSINESS
Introduction Risk & Investment Wealth & Power People & Communities Sustainability & Relationships Industrial Estates or Work Parks Uniformity or Diversity return to top page 2. RISK & INVESTMENT Whether building actually starts will also hinge on persuading a company to buy and manage the estate as a going concern. Depending on size, that might well include public institutions as well as private companies. It is increasingly a game for the bigger players. Government agencies, local authorities and pension funds are increasingly looking to spread their assets and liabilities. But all share the common goal of wanting to see their investment grow, whether in the short or longer term.
As the park begins to take shape, the hunt for tenants will have already started. An empty unit is dead money and getting businesses in, even at heavily discounted rates, gets the ball rolling. Just as you wouldn't let your house to anyone, people have to know that rents will be paid and that, if a particular company goes bump, they won't be left with a mess on their hands.
Equally, no new enterprise - or even reasonably established company - is likely to be allowed to take on (increased) commitments unless their backers are confident that the balance sheet can stand the strain. Bank managers will be scrutinising proposals with care, trying to judge whether the figures stack up. How realistic are the business plans? Are the cash flows sustainable? How long can we give people to prove they have got it right?
Throughout this process the bottom line has been, 'how safe an investment are we being asked to support'? Because the future is an unknown country we can only answer that question by looking at past performance and using it to second-guess what is going to happen next. Hence the almost obsessive interest in trends in the profit and loss account, gearing of loans, security, etc., figures that tend to give a spurious objectivity to what will always be a highly speculative activity.
Events on the other side of the world can create circumstances here that will destroy the strongest companies. Changes in government, scientific discoveries, consumer confidence are all part of a matrix of factors that influence the market place but which have nothing to do with the viability of a product per Se. Rapid change of any sort will make individuals and corporations more cautious about investing in new ventures. It also means that the horizon becomes increasingly short term.
As well as having a firm grasp of the economic "realities" of their particular sector, successful investors develop a "feel" for such things. Even they don't always get it right and for that reason the process is inherently conservative. Good projects (in the sense that they might provide a public benefit) may never see the light of day because they have been proposed by the wrong people at the wrong time.
The decision making process is dominated by the need to show a return and, increasingly, it is the institutions - the banks, pension funds, etc. - who are calling the shots. In other words the process is becoming ever more detached, impersonal and driven by simple and simplistic economics.
The days when an individual bank manager, having spent a lifetime in a community, had the leeway to invest in a locality's long term future is long since past. The success of today's corporate banker - based in a city centre office block - is measured by how much money they bring into the bank.
But for the fact that it is illegal, laundering drugs money would be among the most obvious, risk free investments and the institutions would be falling over themselves to service it. Where the boundary between legality and illegality actually lies is often a moot point. Because we can hardly move today without money and the economic structures that create and put it in our hands, it is sometimes difficult to believe that any alternative exists.
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