Institutional Real Estate Europe

April 1, 2009: Vol 3, Number 4

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From the Current Issue


Capital Punishment

There can’t be many European real estate fund managers looking forward to what the new financial year will bring. Even the most optimistic analysts do not foresee a bottoming out of capital values until the third quarter of 2009 and predict no tangible signs of recovery until well into 2010. In the meantime, fund managers will have to juggle further depreciation of their portfolios, exacerbated by an expected increase in distress sales, with the expectations of their current and prospective investors. And they will have to do it all the while fretting over the loan-to-value agreements with their banking lenders as plunging capital valuations threaten covenant breaches.


Shop Talk: A Conversation with Christophe Cuny

Property derivatives have long been put forward as a means of gaining real estate exposure synthetically without acquiring the underlying property assets and Eurohypo AG in London, under the guidance of managing director, derivatives, Ed Stacey, has been a leading proponent of their use by investors. Christophe Cuny, who recently joined the company as a director of the London-based property derivatives team, spoke with editor Richard Fleming about his new role and the benefits that a broader and more considered use of property derivatives by real estate investors can bring.


The Vision Thing

Last year was a tough one for the non-listed property fund industry. The credit crunch and its associated economic downturn has hit the performance of property funds and the industry is now looking at how to address the problems associated with falling valuations and the impact of gearing. In this article, we look at the factors that are contributing to the current situation and how these will influence the industry during the coming year.


REIT Reasons to Be Cheerful

With the gloomy news headlines seemingly mounting by the day, it is difficult for the real estate industry to be cheerful in the midst of a financial crisis that is rapidly becoming a full-blown global recession. But I think the profound structural changes that have been initiated in the listed industry in recent years will be extremely positive for the sector as we emerge from the downturn, as well as mitigating some of its baleful effects in current markets.


Musical Chairs


As real estate developers and investors tinker with the real estate value equation amidst a storm of uncertainty, despair and opportunity, many property professionals are questioning sustainability’s place at the table. Sustainability, broadly defined, is an integral part of the real estate business and always has been — whether or not that is what it has been called. Sustainability’s definition has grown holistically to encompass a broad range of topics including intelligent design, energy efficiency, water conservation, urban regeneration as well as socio-political considerations.


From Boom to Bust

Having benefited from a virtuous cycle driven by cheap debt, commercial real estate in Europe is now caught up in a vicious cycle of value destruction, along with virtually every other asset class, thanks to the global credit crunch. The “Commercial Real Estate Reacts to Changes in the Capital Markets and Real Economy” chart below details the various facets of the two distinct market types, the virtuous cycle and the vicious cycle. Securitised real estate — both debt and equity — has already gone through several rounds of violent and volatile repricing. Private equity real estate is also experiencing this repricing, albeit through a more drawn-out process.

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