After the relieve of the GRESB release, I spent a couple of days at the EPRA Conference in Berlin last week. (EPRA is the main industry association of listed property companies, REITs, in Europe.) The conference took place right next to the "Reichstag," which is where the German government decides upon the future of Europe. Not surprisingly, the mood at the conference was not very upbeat, to say the least. Retail giants Unibail and Westfield started of the discussion on a rather positive note -- their classy shopping centers are holding up pretty nicely, and, well, Unibail currently borrows at 2.2% in the capital market. Interestingly, large retail REITs are increasingly looking to gobble up internet retailers, to deal with the unstoppable online shopping trend. At the same time, there is an increasing divide between well-positioned, regional shopping centers, and the traditional "mall" model, with the latter pretty much going down the drain, also in Europe.
Well, that was the beginning of the doom and gloom. "Gravedancer" Sam Zell, arguably one of the godfathers of real estate (equity) securitization in the US, provided his unsalted view of the European market: zero exposure. Sarah Montague, the BBC trophy interviewing old Sam, had a difficult time, with Sam nailing her from time to time ("hey, if you can't stand the heat, you shouldn't interview me…"). Trying to end on a positive note, Sarah asked about something positive on Europe. Sam: "well, I really like chateaus, the wines and the cheese." Ian Shepherdson unapologetically shattered the last rays of hope in his outlook on the European market: France is the new Spain, Poland will be in a recession soon (as consumer spending dries up) and real GDP growth in the UK will be zero for the next years (with the current government committing suicide through the fiscal austerity).If the eurozone collapses, expect GDP to shrink with 30%, on average. With pale faces, REIT investors and managers left the conferences (which might have been due to some excessive drinking at Felix, the club next door to the hotel). Key conclusions: go core core core in a select number of European cities (APG's Patrick Kanters choices include Oslo, Stockholm and London. Unsurprisingly, no Eurozone countries). I see some potential in niches like student housing, healthcare (following increasing privatization in the sector) and high-quality parking garages. But the times of double-digit returns seem long gone.
I'm in North Italy (Riva del Garda) now, for "Re+build," a big conference on green retrofitting. (Given the dire state of the Italian economy, retrofitting seems a good way to spend tax dollars.) I have to admit that the Italian way of life is hard to beat, the scenery is amazing, the pizza's are real, and, well, I've already seen more Ferrari's than I normally see in Holland during a whole year.