If you missed CEDEM CEE 2009 in Prague on Sept 23-24, you didn’t just miss out on a great networking opportunity and a great party – you missed out on some of the most open and frank discussions the conference has ever provoked. Here’s just three excerpts:
–“It’s a tsunami of distress that’s rolling across Europe. It’s certainly rolled across the UK and it’s coming your way. It will hit the banks whether they want to accept it or not, because the decision generally is not theirs.” – Guy Barker (Palmer Capital Partners)
–“I don’t think we’ve reached the bottom of the market yet. The banks haven’t really accepted that they’ve got issues in their own portfolios at the moment and in my view they haven’t sat down and tried to work through them. We’re beginning to see the first few distressed sales coming up. By distressed I’m talking about buying a good asset in a double-digit yield, because loan repayments are coming up and if that loan is not repaid banks will foreclose.” – Christopher Zeuner (JER Partners)
–“Risk was factored out of investment decisions in 2006 and 2007, and frankly it’s insane that anyone would pay the same yield in Warsaw as they would in Hamburg. It’s insane that they’d pay the same price in Romania as they would in Poland.” -Chris Bennett (Europa Capital).
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According to a UEFA document unearthed by Ukrainian news website Champion, the Lviv stadium project is so risky at the moment, that virtually not possible to happen. See the secret document, as published on Poland’s gazeta.pl. (It’s in English, btw)
The Financial Times tells the story of Karlin and Holesovice, in a story that features a developer, an architect, an agent, a store owner and a curator. Not a bad advertisement for the popular Prague districts. Not a lot of looking ahead at what’s coming up there, but no harm done either.
Shares in the Spanish property group Reyal Urbis are reported to have fallen 8.7% on word that creditors are forcing it to sell off prime properties in Madrid.
“This is bad news for Reyal Urbis given the steep slump in Spain’s property sector prices, but it looks like the banks are being really tough now when it comes to renegotiating the company’s debt pile. Times are tough for everyone,” a Madrid-based trader [told Reuters].
The vultures are unlikely to be circling above CEE for a while yet, with the whiff of Iberian carrion wafting this way and the ability of banks (so far) to be lenient.
Just when you thought all the news would be bad, the fund tracker Lipper said that 11 of the top 20 UK equity funds in August were real estate funds, and that nine are invested in the UK or Europe. At the root of the trend is a belief that asset prices are firming. UK commercial real estate values rose 0.2 percent in August, according to Reuters.
“Will capital values improve by 10-12 percent over the next two or three years? I would think so, and that justifies the rise in share price,” he said, noting the gap between yields and borrowing costs remained high, benefiting buyers.
The daily E15 is reporting that Unilever will announce today that the company is pulling out of the Czech Republic. The company gave up on one of its factories back in 2004 and would according to the article now abandon its plant in Nelahozevsi along with its headquarters at Thamova 18. We wonder how the private investor that just bought that building over the summer feels now about its purchase from Invesco? Empty buildings don’t produce much cash flow after all. Update: this story has been confirmed.
Investment on Europe’s property is down, says the Wall Street Journal. Not exactly breaking news, just more of what we now call the same-old same-old. But the article makes good points, taken from credible sources.
As lenders try to mitigate risk, only lending for absolutely prime properties – well-let assets in good locations offering secure incomes – which are scarce, they face competition from rivals but, unlike in the boom times, are unwilling to compete on margins, preferring to lose deals instead. “Debt is still available, although it is more expensive and only offered on certain assets,” said Michael Rhydderch, a partner at real estate brokers Cushman & Wakefield.
European banks usually require some 300 basis points above the European interbank offered rate, while U.K. banks want 225 basis points to 250 basis points, indicating that European property is viewed as more risky.