IPD/IPF conference: The property industry runs the risk of repeating mistakes of previous cycles, according to a panel of experts at the IPD/IPF conference.
“The industry is still resisting change. We are even resisting the idea of a loans database, which is the very least we can do,”‘ said Neil Cable, head of European real estate at Fidelity Worldwide Investment.
John Slade, UK chief executive of BNP Paribas Real Estate, said that there were already signs of risky lending returning to the market: “While we have success-related incentivised pay, we’ll see a lot of risk taking.
We are all after increases profits, after all. The problem is that risk management declines when the market improves,” he said.
Slade said that he was concerned about the recent crop of mezzanine debt funds: “Do they know what they are doing? The IRRs they are chasing are high and possibly unachievable, and could lead to bad decisions.”
Sabina Kalyan, chief economist, CBRE Global Investors, said that UK assets are “starting to look very pricey” and that the market should be mindful that this is largely down to the role of the Central Bank’s loose policies.
“I wonder if this means that we are going to have to get used to lower implied returns, or whether this means that investors will continue to target riskier assets in the search for higher returns. We must be very careful about how we communicate expectations of returns to our clients.”
Max Sinclair, head of UK division, commercial real estate at Wells Fargo took a more optimistic view of the industry’s ability to learn lessons from,previous crises: “Today a lot more of the money in the market is equity rather than debt. LTVs have come down. We have learned and moved on.”
Helical Bar chief executive Mike Slade said that the previous crisis was the fault of the lenders rather than the property community: “We are the victims and not the perpetrators. The government made policies that enabled banks to lend recklessly,” he said.
