Interview

1. 22 VGM/Real Estate October 2009
London market noted a decline of 0.3 percent. Moscow future. Many of the risk-loving oppor- Property guardian
Continued from page 18 Some genuine optimists are even be- Continued from page 21 tunity funds have left and we do not Continued from page 19
coming slightly euphoric. They think expect those remaining to invest with-
7 percent reduction in the City and that the worst is already behind of 2011. But then it will be a quick re- in another year. Western international Regular management
stability in the West End. ‘Further them. Recovery is imminent, so too covery as demand has been postponed corporations have not left Moscow. Camelot, in the meanwhile, is also a
drops are expected over 2009 and for Europe. Because London, with its because of the crisis.’ They have merely adjusted their recognised security provider which
2010 but the worst is behind us. The extensive offices market, and being Selman shows some figures that pro- growth plans. Russia will always re- complements the supply of services
quarter closed with overall vacancy the financial capital of Europe will, as vide proof of the dramatic correction main an important market. We have for the protection of vacant property.
rates at 8.1 percent, with Grade A va- always, also set the trend again this on the market. ‘Moscow rents have seen a correction in the growth expec- The company currently provides serv-
cancies at 5.9 percent.’ time round. Albeit that the values in come down tremendously. In certain tations. Before the crisis it was not un- ices under the banner of Regulier
According to JLL, the ‘improved head- the major continental office markets Moscow office properties we see ten- common to see the large corporations Vastgoedbeheer.
line statistics’ disguise the ‘continued dropped much less and will therefore ants paying 2,500 dollar per square take up office space defensively to ac- Van Gestel: ‘Both our safety and our
risk’ however. The property consult- also not rise as rapidly. metre per annum while subleases are commodate future growth. We do not security activities have been estab-
ant emphasizes the risks of the cur- The real estate analysts at JP Morgan being negotiated at 500 dollar per see that happening now. Some inter- lished as an extra service for our
rent yield compression in London. in London, who are experts in real square metre. In Moscow, inner city national tenants even gave back space clients, which is both complimentary
‘We believe that demand and supply terms, are even assuming an increase office space sold at prices of 20,000 in their new Moscow offices.’ as well as overlapping for temporary
imbalances have driven recent yield of 10 percent for British property in dollar per square metre before the cri- Consequently, there is a significant de- occupation. In the forty ‘blackspot
levels, not property fundamentals. the forthcoming twelve months. Yield sis. Now we see transactions at levels lay in the take up in the Moscow mar- neighbourhoods’ in the Netherlands
This may well continue, but much of compression is back! They predict of 4,000 to 6,000 per square metre.’ ket, says Selman. ‘We see a vacancy which are given extra subsidy, during
the overseas demand was encouraged that the prices of continental proper- Will the investment climate improve rate of 25 to 30 percent today. The pre- the New Year’s Eve celebrations for
by the weak pound.’ ty will stabilize. with oil prices back at 70 dollars a bar- crisis vacancy rate was below 5 per- example, we could ensure that there
At the beginning of September the JP Morgan’s analyst Harm Meijer rel? cent for quality space. Most tenants is extra security at premises which
National Institute for Economic and warns however, that the economic re- Selman: ‘We do see an occasional local are still here but have chosen to post- are temporarily inhabited.
Social Research, an independent Brit- covery is artificial, and is mainly investor put money into the market. pone their move until the market sta- Camelot’s real estate management is
ish think tank, reported that the Brit- based on huge interventions by the But in general, Russian investors are bilizes. Once this happens tenant ac- specifically geared towards managing
ish gross national product in the government. ‘In essence our view is cautious as they try to limit their loss- tivity will be high. Once recovery sets vacant property according to certain
three months ending in August, that future profits are being brought es. I expect the Russian state organiza- in in 2011, I do expect a new bubble, processes as efficiently as possible. At
showed a slight growth of 0.2 percent forward by the policies, building a tions to continue buying. But I do not because most new (preconstruction) certain times we check lifts, ensure
for the first time since May 2008. In highly vulnerable property market foresee any western investors commit- developments have been frozen. It will that soaps are replaced in the cloak-
the three months to July, NIESR still with a small margin for error.’ ¶ ting to new investments in the near take some time for developers to start rooms, fire extinguishers are tested
new projects and then to complete or installed, the gardening is taken
advertisement them. By that time most of the vacan- care of, et cetera.
cies will be gone and demand will put The inspectors of Camelot do their
pressure on the rent prices.’ rounds on the premises using a lap-
How about investing in Moscow real top and a camera. If the inspector no-
estate? Selman gives potential inves- tices a leak for example, then he sub-
tors a stark warning. ‘Investing in Rus- mits a photograph or video to the
sian real estate again is a game for ad- client, together with a suggestion to
venturers. Before the crisis an IRR of a solve the problem. At the same time
mere 8 percent was the most you all the relevant data, such as the me-
could expect. Now an IRR of 20 to 25 ter readings for example, are record-
percent is in reach again. But this is a ed for the client and reported regular-
game for the brave. You must take in- ly. In this way Camelot ensures that
to account though that you can lose vacant premises continue to be repre-
everything overnight. A strong system sentative in the event of a sale or a
of property rights is non-existent and rental’, the CEO of the expanding
the state will not protect you.’ ¶ property guardian guarantees. ¶
Property industry on the balance sheets of banks across
Continued from page 17 Europe. The opportunity must exist
to provide assistance to these various
companies over the coming years. Po- banks to work out the underlying
tentially, much of this debt is cur- property assets. There must be doubt
rently ‘underwater’, especially in rela- as to whether the property divisions
tion to development loans. Specifical- of banks across Europe have the re-
ly, there is a real risk that when large quired level of suitably qualified staff
scale developments that are currently resources to effectively deal with this
under construction will be completed situation.
in coming years, the value of the Some banks may be hesitant to out-
completed development will be less source this type of work, as this cost
than the debt associated with the could possibly only further the losses
STANDS
project. that these banks have already suf-
The equity investment has probably fered, but in this situation, it is im-
already been burned. The issue arises portant for the banks to remember
(1.800 m 2)
as to what will happen in the future that the property industry is about
now
with these loans. There is a view that creating opportunity in any market.
the banks will support these loans The ability to think creatively about
already fro until the market comes back, but it how a property transaction could be
m appears unlikely that banks will wait structured in order to create real val-
€13,000
forever for that day to possibly arise. ue will be paramount, if this is not
The savvy investor could then be in a achieved then an opportunity could
position to take the project from the be lost.
equity holders and part of the debt
payable to the bank. Obviously a sig- Exciting times of change
nificant amount of due diligence Overall, there is no doubt that we live
would be required before entering in- in exciting times of change. The prop-
to such a transaction, as there is of- erty industry is almost reinventing it-
ten a good reason why a development self. There is little doubt that there
project has performed badly. Again, are investors who are keen to support
such poor developments are usually the perceived next waves of growth
associated with a complex arrange- as they are currently supporting vari-
ment and demand for the underlying ous areas of the properties industry
asset is unclear. There is no doubt such as the CMBS market, consolida-
that opportunity exists in this area, tion of the listed sector and further
but those who do their homework growth of the funds sector. Whatever
well and have the right knowledge facet of the industry an investor has
and experience, will inevitably do an interest in, it has never been so
well. important to have a sound under-
Considering the ease at which banks standing of your niche area. Real un-
all over the world lent money to bor- derstanding of the factors affecting
rowers over the past years, there is the underlying property assets and
little doubt that substantial amounts strong financial support are crucial to
of non-performing loans are sitting avoid potential losses in this market. ¶