Sunday, 11 March 2012

MIPIM - glamorous surroundings, serious intent

If you are a reader of a certain popular Sunday paper, you will have learned that MIPIM, the international property conference which takes place in Cannes each March, is a place where local authority councillors go to swill champagne at the ratepayers expense and most men spend the rest of the time, when they are not swilling champagne, in the arms of the many prostitutes that allegedly flock to Cannes for the MIPIM week. I must admit that the article made me feel a bit inadequate. I certainly have had the occasional glass of champagne at MIPIM and, even more occasionally, have had a glass or two with local authority councillors, although it is normally beer, but, in all the 13 times that I have attended MIPIM, I have never once knowingly talked to a prostitute. I think I saw one once – well two actually – when two statuesque and very attractive blondes with a heavily muscled minder appeared to be working the foyer at the Carlton Hotel, but even now I am not sure.

It is true that MIPIM takes place in wonderful surroundings – glamorous villas, luxury yachts and 5 star hotels – with delicious food and drink, but the vast majority of attendees go there to work very hard. The rather pathetic article in the Sunday Express is an easy one for a lazy journalist to write but I remember a few years ago, sitting beside a journalist from the Yorkshire Post at a dinner hosted by Bradford Council. I asked him what he made of MIPIM. “I came here to write an article about local councillors spending the ratepayers money on a champagne junket in the South of France” he said. “But, having seen how hard they have worked, the real contacts they have made, and what they have achieved for their area, that is not the article I am going to write at all”. It is a brave decision for a local authority to attend MIPIM, particularly when times are hard and Government cuts are affecting every authority in the land but it is a hugely worthwhile investment in the future of their area and an unrivalled chance to engage directly with investors, and those who direct investment, to ensure that opportunities for growth – and jobs, and housing – are given the best possible chance of success.

So what was the mood of those of us who were concentrating on the UK property market for 2012 and beyond? The overriding impression is that there is a huge amount of equity available to invest in opportunities, but very few opportunities which match the risk criteria of those investors. It is rare for an agent to be so popular but with the many developers desperately seeking opportunities to invest, anyone who might be able to source those opportunities was feted. The real challenge , and possibly therefore the opportunity, comes on the debt side. In the heady days of 2005 – 2007, a huge amount of debt was written on property transactions normally on a 5 – 7 year term. In the next 2-3 years, some £135bn of this debt is coming up to be refinanced, and many of the traditional debt lenders are out of the market. That, coupled with the more stringent requirements to be imposed on the banks by Basel III, means that banks can no longer ‘pretend and extend’ so we are beginning to see the first signs of new debt providers – the insurance companies, equity funds and the like – coming to the market. So the second most popular people at MIPIM seemed to be those who have access to that debt. The by product of all this of course is that there is a greater likelihood that much of the property which has been locked away under the control of the banks, because low interest rates and outstanding debt exceeding value have made bringing property to the market very unattractive, might actually now start coming to the market – and whilst this potential flood of properties might have a significant downward effect on property values in the short term, it is a real time of opportunity for the well funded developer that has the skill and innovation to bring some of these neglected assets back to life. It is going to be a painful time for some of those banks though, because they are going to have to take some fairly serious further writedowns before they come out the other side.

Chris Haworth
Head of Commercial Division

Commercial, Cambridge
T: 0207 016 0729