In titling its 39th Money into Property report “Mounting evidence of recovery”, DTZ struck a decidedly upbeat tone this week. The risk is it’s too upbeat too soon, and too London.
We should, of course, hope the firm’s research team is on the money. The case it makes for recovery is well founded and well argued. But, as any investor is obliged to tell you, past performance is not necessarily indicative of future results.
So what do we know, based on the research? The amount of stock invested in Asia Pacific real estate is growing, in North America and Europe it is in decline. Equity continues to recover around the world while debt holds steady.
Non-bank lending is growing – indeed, non-bank debt is now so significant that it is broken out in the report for the first time. And the stability and diversity of debt sources offered in the UK puts us at the forefront of this trend, as we follow the rest of the world in deleveraging and embracing private equity.
On the downside: some 70% of lenders don’t expect substantial recovery in lending conditions until 2014 – and the last few reports show that this is getting later and later. But, more positively, more debt is likely – it is just not going to come from traditional lenders.
Now it gets more contentious. DTZ argues that the UK is currently hot on a fair-value basis and offers the best relative value in 11 years. What’s more, once you take price and liquidity into account, the UK is simply unbeatable globally.
It is a deliberately optimistic call, though there was much murmuring over drinks after this week’s launch that it was perhaps too optimistic, especially once you take the London-as-another-country factor into account. Let’s hope not, but I fear the murmurers may be right.
• Credit to Mike Ashley, who will sit down with landlords next Friday to discuss his demand for massive rental cuts across his recently acquired fashion chain, Republic (p38). Landlords affected might not feel so charitable; the retail billionaire has told them he will shut the stores unless they accept sacrifices of up to 50% in rent and revised terms. So why give him credit? Well, Ashley needn’t have agreed to the meeting at CBRE’s London HQ. Landlords may have little option but to accept his terms, but at least they will get to make their case in person.
• Credit too to the Crown Estate, whose first Total Contribution report was published this week. It would be easy to file the report in the “worthy, but dull” drawer, but it matters. The Crown is perhaps the first organisation (in any sector) to measure and bring together the social, environmental and economic contribution of a business in one report – from the jobs it supports to the carbon it averts. At a time when property wants to ensure its contribution to the economy is fully appreciated by government, “total contribution” is a term that should have greater currency.
• The damages and fees recovered by Tim Martin as a result of high court battles with various agents and investors over the past eight years stands at around £10m (p39). The JD Wetherspoon chairman has now warned others to be wary of back-to-back freehold deals.
This week the pub operator settled its final claim, accepting a £400,000 payment from investor Jason Harris, who does not admit liability. The battles date back to the case of Van de Berg & Co, which had fraudulently diverted freehold properties to third parties while recommending Wetherspoon take leases on them, thereby boosting the value.
Wetherspoon has some advice for retained agents considering back-to-back freehold deals: get written consent from the retailer itself. It would be wise to heed that advice.
damian.wild@estatesgazette.com
