Bank reluctance to sell will protect European RE prices, says JLL's Ulbrich

European commercial property prices will continue to be protected from sharp falls, even if pressures increase from occupiers and rents, by the reluctance of banks to sell at a loss, says the head of the EMEA region for Jones Lang LaSalle. "I agree this is definitely a hanging-from-a-cliff scenario but you have both sides working, so whatever happens it won't be devastating for everybody," Christian Ulbrich told PFE in an interview. "Everyone is interested in buying time to manage what is in their underlying portfolio. That means at the moment most of the banks do not have a particular interest to take all these losses, and on top of that they are not really interested in becoming the responsible party in the deal. So either they can keep their existing sponsor motivated, or they identify a new one to take the asset management - or .. they go for a third-party provider." The difficulty with highly-leveraged, non-recourse-financed deals is that the original sponsor may not have much interest in working on a portfolio if its equity has been wiped out. "So .. you might even see banks write off loans and keep the existing sponsor so that he sees some upside again, stays motivated and continues to do the asset management," Ulbrich said. (Full Q&A interview to be published in 123 Property Investor Europe on Monday 1 June 2009)