I still believe Detroit is a good bet – guru Hobbs
stigma: Bankruptcy was good move for US city, says financial pundit
FINANCIAL guru Eddie Hobbs is standing by his company's property investments in Detroit.
The city made American history on Wednesday when it became the country's largest-ever municipal bankruptcy case.
Michigan Governor Rick Snyder said Detroit had reached a financial emergency, with a long-term debt estimated at $18.5bn (€14bn).
The former industrial powerhouse has seen its population fall to 700,000 from a peak of 1.8m in 1950.
Mr Hobbs said yesterday that anybody who invested in Detroit over the past number of years had known that the possibility that the city would default on its debt was "on the cards".
He added that either a default or a restructuring were inevitable and that this had been factored in while investment decisions were being made.
"We're almost at the bottom of the market – the bottom of the property market in America was quarter four of 2011 and we bought in quarter four of 2012," he said.
"We've invested in middle-class and upper-middle-class neighbourhoods near the university areas, where there's a great demand.
"When you contrast the Irish property market with Detroit's, the Detroit market is in a remarkably better state," he added.
In January, Mr Hobbs had spoken of a remarkable recovery and manufacturing rebound in the American Midwest.
"On property we remain unconvinced that the floor has yet been found in the Irish market and favour distressed property in fast-recovering economies like the USA," he wrote.
"We are currently investing heavily for clients in Metro Detroit," he added in a post on his website.
Metro Detroit is the name commonly used for the metropolitan area of the city.
Mr Hobbs said that investments for clients in the area were making rental yields of up to 15pc at the time and he said there was scope for capital uplift.
The minimum required for entry into the investment fund was €1m – leaving it open to his most wealthy clients.
The TV star said that he believed that the bankruptcy decision was a good move for the city, despite the possible stigma attached, as it was suffering "crushing" debt repayments.
"It's a washing out of a debt problem," he said. "One way or another, the municipality will start afresh".