Have Europe’s retail property owners, banks and regulators learned any lessons from the Great Recession they are just now climbing out of? Yes and no, the continent’s top executives said during a panel discussion at the ICSC European Conference in Paris today. On the one hand, owners and banks are basing financing on cash flow rather than property valuations, said Rachel Lavine, CEO of the Netherlands–based Atrium European Real Estate. “A lot of money is targeting income-producing properties,” she said, pointing out that investors have been burned by the fluctuations in property values in recent years.
European investors, like their counterparts in other corners of the globe, are on a flight to quality, said Marcus U. Hüttermann, COO of Essen, Germany–based mfi management für immobilien AG. “Financing is now only available for the very best properties. Many poor assets will need a lot more equity to survive,” he said. “In our markets there used to be dozens of banks, but now there are only four that finance big developments.”
But governments in Europe are not regulating the market appropriately to avoid another crisis, the panelists agreed. “Regulators are regulating the wrong people,” said Guillaume Poitrinal, CEO of Paris-based Unibail-Rodamco, Europe’s largest retail landlord. “It’s not the banks that created the crisis, it’s the securitization market,” he said. “To the securitization market, regulators are still saying ‘you can still do as much as you want.’ The wrong people are paying for the crisis.”
David Atkins, CEO of London–based Hammerson, agreed that the securitization markets require more oversight, but said regulations requiring banks to set aside more capital to cover potential losses will help the industry. “Because of the new regulatory framework new capital requirements on banks will keep them from lending,” he said. “But more pain now will be beneficial for the property markets in the long run. The Continental European response is better than the growth-oriented response seen in the U.S.”
Securitization rules may not have changed, but that sector still hasn’t reopened yet, said Pascal Duhamel, CEO of Paris-based Carrefour Property, the real estate division of the giant hypermarket chain. He said the crisis has re-emphasized to lenders and borrowers the importance equity. “The average loan-to-value has fallen dramatically,” he said. “The result will be a better balance between debt and equity.”
And while Atkins says he is confident that the pain caused by the recent recession will “take a lifetime to wear off,” Poitrinal said he feared the human desire to make money will overpower any conservative instincts within the next 3-4 years. “Banks,” he said, “will forget their mistakes soon.”
Compiled by the staff of Shopping Centers Today. © June 15, 2011 International Council of Shopping Centers.