Despite rays of light in Europe, recovery at risk from banking system - panel

It is too early yet to speak of a recovery in European property markets and even though some rays of light may be apparent, risk from the undercapitalised banking system remains high, concluded a panel of top German real estate players at a Berlin conference yesterday. "We see the first rays of light in a long dark tunnel for example in London and a bit in Paris," said Christian Ulbrich, CEO of EMEA for Jones Lang LaSalle. CEE, however, remains in poor shape and the worst is yet to come there. Worst affected is Russia. Franz Lucien Mörsdorf. CEO of German savings bank real estate fund manager Deka Immobilien, told the Handelsblatt annual real estate conference his company has recently acquired assets with secure leases at yields of 6.5% to 7% but still sees some further rise ahead. Wulf Meinel, European real estate managing director for the Carlyle private equity group, said US banking system problems will spill over into Europe, continuing to block credit for property and pushing prices lower. "In Europe as well I see the theme of distressed property remaining on the agenda," Meinel said. "Yield expectations will rise and prices will slide further," he predicted. Claus Jürgen Cohausz, board member of WestImmo, part of the WestLB savings bank group, said he is not so pessimistic. The widening of differentials between real estate and no-risk sovereign bonds is setting up a reversionary scenario that should limit further dramatic price falls. Christian Schulte Eistrup, managing director of Zurich-based Corestate Capital, told the conference economic problems are pushing investors increasingly toward conservative, core investments. "Most are looking for sustainable assets in top locations, and there are still some very interesting opportunities out there," he said. But strategies should focus on single investments. (Full story to be published in 120 Property Finance Europe, published on Monday 11 May 2009)