“The growth of emerging markets is going to be, in the
medium and long term, positive for both commercial and
residential real estate,” Roubini, an economics professor at New
York University, said at the MIPIM property trade fair.

“We have fast-growing economies where income and wages are
growing, industrialisation and urbanisation on a massive scale
in China today, and increasingly so in India and most other
emerging markets,” he told reporters at a press briefing on the
sidelines of the event.

This means there will be huge demand for new homes, shops
and offices in these countries, although, in the short term, the
ongoing turmoil in the Middle East could hurt the growth
prospects in these countries if oil prices spike, he said.

Brent crude rose for a second day on Thursday to surpass
$116 after forces loyal to Libyan leader Muammar Gaddafi bombed
oil industry infrastructure, inflicting longer-term damage on
the country’s exporting capacity. [ID:nL3E7EA0I7]

“If oil prices were to go to $140-$150 a barrel, this story
could be different … the impact of oil prices is more
significant on inflation in emerging markets, less in developed
economies,” said the Turkey-born Roubini.

The growth prospects for real estate in more economically
advanced economies, such as the U.S. and Europe, are different
from emerging markets as they face years of deleveraging after
the excesses that led to the global financial meltdown, said
Roubini, dubbed Dr. Doom for warning of the crisis before 2007.

“There’s an ongoing process of deleveraging and many banks
on the U.S. have recapitalised faster than those in Europe. And
I think the Europeans have been behind the curve and till have
many bad assets on their balance sheets,” he said.

“Especially in commercial real estate both in the U.S and
Europe, where a lot of the mortgages issued in the middle of the
decade is coming to maturity. It is a timebomb that needs to be
addressed,” Roubini said.

“In the next few years with fiscal austerity and exit from
zero rates in the UK, the Eurozone and eventually the U.S., is
there enough resilience for growth in consumption and in the
corporate sector? I think that is an open question,” he added.
(Reporting by Daryl Loo; Editing by Andrew Macdonald)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)

“We have the appetite to do more new lending to UK commercial real estate and to residential development this year,” Brendan Jarvis, head of Barclays Real Estate, told Reuters on the sidelines of the MIPIM property trade fair.

“We have already made a strong start for UK net new lending so far in the first quarter,” he said, declining to give specific figures on lending targets for 2011.

The bank, which had largely avoided a commercial property meltdown that hit many of its peers, renewed its focus on the sector in 2010 in a bid to wrest market share from rivals such as part-nationalised rivals Lloyds (LLOY.L: Quote, Profile, Research) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research).

It also plans to continue lending in regions including Wales and Scotland, and in cities such as Birmingham and Manchester, although businesses overwhelmingly expect government cuts to hit the commercial property markets in those places.

“Those are very large cities and there are bound to be opportunities. Some areas are going to be more challenging and difficult, but if you look at residential development for example, there are a lot of people who want to take advantage of the supply and demand imbalance there,” Jarvis said.

The bank will also consider loans for deals on secondary property, even as the bulk of buying interest has so far focused on prime buildings in London, said Fiona Freeman, who heads Barclays Real Estate’s corporate loans business in London.

“We are willing to look at deals that involve a spread of risks — for example a purchaser might look at an asset and say they can improve the voids to say 12 percent from 20 percent, we would consider it,” she said.

CONVERTS GROWTH

Outside the UK, Barclays Real Estate plans to further grow its investment banking business, particularly in the equity and debt capital segment of the market.

“Germany is an interesting market for us and we continue to spend a lot of time there. We’re also growing in other eurozone cities like (those in) France and the Netherlands,” Jarvis said.

One particularly attractive business, he said, is helping listed European property companies and real estate investment trusts issue convertible bonds, as they seek to lock in low interest rates by replacing bank loans carrying average terms of 3-5 years with 7-10 year bonds.

The bank will take a “wait and see” stance when it comes to the commercial mortgage-backed securities CMBS.L as it sees ongoing uncertainties for the segment, especially due to the Basel III banking rules on the treatment of securitised debt.

The property industry, hungry for new funding sources, has been hoping Europe’s lacklustre market for new CMBS will be revived by an expected Blackstone (BX.N: Quote, Profile, Research) deal worth 360 million pounds, the first in more than three years. (Reporting by Daryl Loo; Editing by Andrew Macdonald) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

“We have the appetite to do more new lending to UK commercial real estate and to residential development this year,” Brendan Jarvis, head of Barclays Real Estate, told Reuters on the sidelines of the MIPIM property trade fair.

“We have already made a strong start for UK net new lending so far in the first quarter,” he said, declining to give specific figures on lending targets for 2011.

The bank, which had largely avoided a commercial property meltdown that hit many of its UK peers, renewed its focus on the sector in 2010 in a bid to wrest market share from rivals such as part-nationalised rivals Lloyds (LLOY.L: Quote, Profile, Research) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research).

It also plans to continue lending in regions including Wales and Scotland, and in cities such as Birmingham and Manchester, although businesses overwhelmingly expect government cuts to hit the commercial property markets in those places.

“Those are very large cities and there are bound to be opportunities. Some areas are going to be more challenging and difficult, but if you look at residential development for example, there are a lot of people who want to take advantage of the supply and demand imbalance there,” Jarvis said. The bank will also consider loans for deals on secondary property, even as the bulk of buying interest has so far focussed on prime buildings in London, said Fiona Freeman, who heads Barclays Real Estate’s corporate loans business in London.

“We are willing to look at deals that involve a spread of risks — for example a purchaser might look at an asset and say they can improve the voids to say 12 percent from 20 percent, we would consider it,” she said.

CONVERTS GROWTH

Outside the UK, Barclays Real Estate plans to further grow its investment banking business, particularly in the equity and debt capital segment of the market.

“Germany is an interesting market for us and we continue to spend a lot of time there. We’re also growing in other eurozone cities like (those in) France and the Netherlands,” Jarvis said.

One particularly attractive business, he said, is helping listed European property companies and real estate investment trusts issue convertible bonds, as they seek to lock in low interest rates by replacing bank loans carrying average terms of 3-5 years with 7-10 year bonds.

The bank will take a “wait and see” stance when it comes to the commercial mortgage-backed securities (CMBS) as it sees ongoing uncertainties for the segment, especially due to the Basel III banking rules on the treatment of securitised debt.

The property industry, hungry for new funding sources, has been hoping Europe’s lacklustre market for new CMBS will be revived by an expected Blackstone (BX.N: Quote, Profile, Research) deal worth 360 million pounds ($582 million), the first in more than three years.

(Reporting by Daryl Loo; Editing by Andrew Macdonald)

(See www.reutersrealestate.com for the global service for real estate professionals from Reuters)

“Right now it’s a difficult situation because there is too
much liquidity in the world and in Germany looking for core
products, in combination with the relatively low interest rate
environment, so we have been looking at other opportunities that
we can add value to,” IVG (IVGG.DE: Quote, Profile, Research, Stock Buzz) CEO Gerhard Niesslein said.

The property group is exploring up to 17 cities in Europe
and the U.S. for investments through partnership deals, in which
it expects to take between 5 to 20 percent equity stakes, he
said on the sidelines of the MIPIM real estate trade fair.
[ID:nLDE7192E4]

“Let’s take Lisbon — nobody would go there today. But
Lisbon is not going to disappear from the map for the next 20
years and you’re getting fascinating returns in the middle of
the city,” Niesslein said on Monday.

He declined to say if IVG was planning to invest there.
“The problem is not with equity but finding the right core
product at an acceptable pricing. Are we being pushed towards
letting risk now more than in the past? Yes — and we are doing
this worldwide,” said Karl-Joseph Hermanns-Engel, managing
director at Hamburg-based Union Investment Real Estate.

Union’s open-ended fund rival DekaBank [DSUGUD.UL] also told
Reuters last month it had rejigged its near 2 billion euro ($2.7
billion) investment strategy away from core cities such as
London and Paris, to focus strongly on prime assets in regional
UK, French and U.S. cities. [ID:nLDE71L0ZH]

NO TO RUSSIA

While German companies are indicating an interest in taking
a punt on some of the weaker European countries such as Portugal
and Spain, which continue to struggle with sovereign debt
issues, they say Russia is largely off their radar screens.

The Russian government has been trying to attract
international investors with potential initiatives, including a
fund that could co-invest about $10 billion with private equity
firms in the country, a source said on Sunday. [ID:nL3E7E704R]

“We need more time before thinking about investing in
Moscow. From a German open-ended fund point of view, even Moscow
is still not up to our institutional expectation in terms of
stability of the market,” said Hermanns-Engel.

While property in Moscow may offer attractive yields and
longer leases, he noted that there were doubts about the
security of cash flow and property title rights in the market, a
potential headache for foreign investors.

“It’s a pity because we think the retail side of Russian
property is interesting,” said Karsten Hinrichs, chief financial
officer of German developer ECE, which also manages 132 malls
across Europe, including one in Moscow.

“But at the moment there is very limited amount of interest
for finding financing or equity partners for development in
Russia. And looking towards the next two years, I don’t see very
heavy investments there,” he said.
(Reporting by Daryl Loo; Editing by Karen Foster)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)

The new mortgage bond will be secured on a loan from
Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz), to fund the private equity giant’s 480
million pound purchase of the Chiswick Park business estate in
London, two sources familiar with the transaction told Reuters.

The deal’s success will be closely watched by a debt-starved
European real estate industry, hungry for new funding sources as
it struggles to recover from its worst downturn in decades.

The loan to Blackstone — at a 75 percent loan to value –
is expected to be finalised by end-March, and packaged and sold
to investors as a CMBS in the second quarter of this year, said
one of the sources, on condition of anonymity.

Blackstone declined to comment. Deutsche Bank declined to
comment specifically about this transaction.

“We are very confident that the CMBS market in Europe will
re-open in 2011 and we will certainly be a participant in it,”
said Chris Dunn, Deutsche Bank’s head of EMEA commercial real
estate lending, adding investors such as insurers and pension
funds had indicated a strong desire to return to the sector.

“They’ve been underweight commercial real estate for several
years now, so now they are actually very motivated to try and
deploy capital for commercial real estate because it’s a good
time in the cycle to do so,” Dunn told Reuters in an interview.

European commercial property bonds, about a fifth the size
of the $855 billion U.S. market, has lagged the recovery in the
United States due to differences in the way they are structured,
prompting calls for greater reforms. [ID:nLEE6JC000]

“CMBS will come back in a more plain vanilla fashion because
the market does not want complex structures anymore … and it
is pricing that is going to be the issue,” said Barry Osilaja,
director of structured debt at Jones Lang LaSalle (JLL.N: Quote, Profile, Research, Stock Buzz).

A market source said a CMBS deal priced at a premium of
20-40 basis points above the yield on triple-A rated residential
mortgage-backed securities (RMBS) could be seen as “attractive”.

DOWNGRADE RISKS

Although upcoming banking rules under Basel III could make
it more expensive and difficult for banks to issue CMBS, this is
unlikely to stall a European CMBS revival, said Charles Roberts,
a partner and CMBS specialist at law firm Paul Hastings.

“Issuance will happen in spite of the regulations. What we
see now is the market saying it needs securitisation for a
recovery, because it is an important and efficient technique,”
Roberts said, adding he expects to see 5-6 new European CMBS
deals worth up to 2 billion euros this year.

That is still a drop in the ocean compared with an estimated
$126 billion in property debt financing gap over 2011-2013,
however, prompting Moody’s to warn of higher downgrade risks for
some European CMBS this year, potentially curbing investors’
appetite for new issues. [ID:nSGE6AM00F] [ID:nLDE7112B3]

“The current performance of existing CMBS is not helping
because when investors see a series of downgrades, it will be
more difficult to attract them,” said Christophe de Noaillat, a
senior vice president at Moody’s Investors Services.

“At best we expect to see one or two new real CMBS
transactions this year,” de Noaillat said, adding these will
differ from property bonds issued by Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz) last year.

The supermarket chain raised billions of pounds from bonds
secured on rents from its UK stores, but experts said those were
priced on the strength of Tesco’s corporate rating instead of
underlying properties in more traditional CMBS. [ID:nLDE65T15I]
A successful revival could also hinge on the outcome for the
CMBS noteholders who invested in the market’s peak years of 2006
and 2007, but now face steep losses as complex structures make
it difficult to restructure the bonds or sell the properties.

“We expect more noteholders to become increasingly activist
in 2011, and coming together to show a common will so that their
interests are represented,” said Paul Lewis, director of special
servicing at CBRE (CBG.N: Quote, Profile, Research, Stock Buzz) Real Estate Finance.

“Generally noteholders have had enough of blanket loan
extensions so there will be more motivation to do innovative
restructuring … and for a lot of these deals, impending loan
maturities will be the catalyst for action,” Lewis said.
(Additional reporting by Kathrin Jones in FRANKFURT; Editing by
Andrew Macdonald)
($1=.6184 Pound)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)

The FTSE 100-listed landlord said on Monday the value of its
5.3 billion pounds ($8.6 billion) UK and French portfolios rose,
respectively, 12.5 and 1.9 percent in 2010, lifting its adjusted
NAV a share to 495 pence at end-December 2010, from 421 pence a
year ago.
“We expect a positive share price reaction today and remain
‘overweight’, given the continued strong demand for prime assets
and its modest loan-to-value ratio of 32 percent,” JPMorgan
analyst Harm Meijer said in a note.

At 0930 GMT, Hammerson shares were up 1.8 percent to 455.3
pence, outshining a 0.1 percent fall in the broader UK property
stocks index .

Chief executive David Atkins said he expected Hammerson’s
prime UK malls to be insulated from the effects of public
spending cuts, despite concerns that government austerity will
hit the commercial property market this year. [ID:nLDE70K142]

“Even if there were a reduction overall in retail spending
… what we’re seeing in our portfolio is an increase in market
share of spending, and I see that trend continuing in the next
12 months,” Atkins told a conference call.

PRIME FOCUS

Hammerson said its net debt at the year-end was 1.8 billion
pounds, while liquidity, cash and undrawn facilities totalled
1.0 billion pounds. The company said it would target prime UK
and French retail, and London offices for acquisitions.

“In the last 12 months we found good opportunities in each
of those sectors, and I would expect us to follow the same sort
of pattern in the coming 12 months,” Atkins said, adding more of
these opportunities will come from bank asset sales.

Hammerson, which saw its occupancy rise to 97.3 percent from
95.4 percent a year ago, said factors such as the weakness of
sterling and rising commodity costs had affected UK retailer
profitability in the wider market.

This is expected to cause a continued shift in retailer and
investor focus away from secondary assets to its prime,
regionally dominant malls and conveniently located retail parks,
where occupancies and rental values have held up, it said.

The company said disposals in 2010 helped raised 555 million
pounds, of which 219 million was invested in acquisitions.

It proposed a full-year dividend of 15.95 pence a share, up
3.2 percent year on year.
(Reporting by Daryl Loo, editing by Sinead Cruise)
($1=.6152 Pound)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)

This was in contrast to respondents from Greece, Spain, Ireland and Japan, where most respondents continue to foresee further rental declines, RICS said.

The quarterly survey showed that overall, agents in about three-quarters of the 45 countries represented in the survey reported improved demand from tenants for commercial property in the final three months of last year.

“Solid growth in Asia, Latin America and parts of Eastern Europe is providing significant support for the real estate sector,” said Simon Rubinsohn, RICS chief economist, adding this was a key reason for central banks to raise interest rates.

“Even so, our suspicion is that these markets will see the strongest gains in capital values over the course of 2011.”

In the United States, more respondents now expect capital values to improve in the first quarter, resulting in a positive swing in investor sentiment in the form of rising investment transactions and number of bidders per property, RICS said.

Rental expectations for U.S. commercial property still remained in negative territory, although this was less than in earlier surveys, it added.

Expectations for the UK market remained largely divided along regional lines, with respondents expecting capital values to rise in London, while expectations remain negative for the rest of the South, Midlands and North, RICS said.

“Prime London offices are, and will continue to be, the most buoyant part of the market. Meanwhile, secondary offices around the country are a particular area of concern as oversupply will be compounded by likely consolidation in the public sector,” Rubinsohn said.

(Reporting by Daryl Loo; Editing by Karen Foster)

PricewaterhouseCoopers (PwC) and Urban Land Institute (ULI), which interviewed 600 industry players including investors, developers and bankers, said respondents’ hopes of a quick rebound in last year’s survey has waned this year.

“In January 2010, the sunny uplands did not seem too far away, but they do now. Optimism dissipated as every month came and went. It was battered by events,” ULI and PWC quoted one interviewee as saying.

The property industry also faces the threat of further shocks from stressed countries such as Italy, Portugal, and Spain, the report said.

The sharpest wake-up call in 2011 will be felt in the secondary, or “non-prime,” property market, where many believe the real hangover from the bursting of the property bubble in 2008 has not yet set in, it added.

Ratings agency Moody’s reported this week that commercial mortgage-backed securities for non-prime properties in EMEA, especially the UK, are at higher risks of downgrades this year as weak lending conditions persist.

INDUSTRY DOWNSIZING

Interviewees in the PwC and ULI report predicted that one of the biggest themes for 2011 will be the continued downsizing of the European real estate industry, with further job losses as companies clear out the less essential roles.

“There were too many of us knocking around before. Over the long term, our industry will operate in a much smaller space,” said one respondent, while another noted the lack of experienced people “who understand how to manage risk.”

Most investors expect their focus for 2011 to be on just a few “winning” cities and countries where occupational demand will be firmer, mainly in the core Western Europe markets of the UK, France and Germany.

“Outside of the UK, France, and Germany, the main markets will be Sweden, Poland, Italy, and Spain, and nothing else is worth having a conversation about,” said one interviewee.

(Reporting by Daryl Loo; Editing by Andrew Macdonald)

CMBS secured by poorer-quality properties that need to be
refinanced in 2012 and 2013 face the greatest downgrade risk,
with the availability of financing not rising meaningfully in
the next two years, the ratings agency said on Thursday.

The increased risks come from a slowdown in economic
recovery, the end of government stimulus spending, and a
shortage of available capital at banks, it said in a report.
[ID:nLDE70H1ZK] [ID:nLDE70I09V] [ID:nLDE70H1C4] [ID:nLDE6B216B]

“We are increasingly concerned about these downside risks
because of recent developments that could hurt the wider
CRE markets in a number of countries,” said Moody’s senior
analyst Oliver Moldenhauer.

The bulk of CMBS transactions in the Europe, Middle East and
Africa (EMEA) region are secured on commercial properties in the
UK, Germany, and France, while a minority are in Italy, Spain,
South Africa, and the Middle East, he told Reuters.

Property consultants DTZ (DTZ.L: Quote, Profile, Research) has estimated that Europe
faces a real estate debt funding gap — the difference between
debt balances and available refinancing — of about $126 billion
over 2011-2013, the highest amount worldwide. [ID:nSGE6AM00F]

In the UK, Jones Lang LaSalle (JLL.N: Quote, Profile, Research) said Bank of England
data showed bank lending to real estate fell by 16 billion
pounds ($25.9 billion) between September and December 2010, the
largest quarterly drop since records began in 1987.

Moody’s, which earlier expected financing to improve from
2013, said its main concern was a double-dip scenario in which
commercial property values would decrease again, after most
markets staged a tentative recovery in 2010.

For instance, austerity measures across Europe such as
public spending cuts and tax rises will likely hurt employment
and consumer spending this year, which could in turn hit the
commercial property’s recovery, Moody’s said.

“This would have negative implications for the investment
markets, banks, the lending markets and therefore the
refinancing prospects of securitised loans that mature in the
coming years,” Moldenhauer said.
(Editing by Karen Foster and Andrew Macdonald)
($1=.6166 Pound)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)

Commercial property in the UK capital has far outperformed
the broader market in the past year, data has showed, prompting
London-focused Great Portland to line up about 3 million square
feet of new developments projects. [ID:nLDE7091Y0]

“The group remains well placed, in our view, to benefit from
the continuing recovery in central London offices, its balance
sheet remains lowly leveraged and with the capacity to fund the
group’s development schemes,” Nomura analysts Robert Duncan and
Mike Prew said in a note to clients.

At 1012 GMT, Great Portland shares were down 0.4 percent at
543.9 pence each, against a 0.1 percent rise in the UK property
stocks index .

Great Portland said the value of its properties has gained 3
percent to 1.6 billion pounds ($2.5 billion) since
end-September, lifting its third-quarter adjusted net assets per
share by 3.8 percent to 326 pence at end-December.

“With the supply of available space to let falling and rents
now rising, we expect these supportive conditions to persist
throughout 2011,” the company’s Chief Executive, Toby Courtauld,
told Reuters after the trading update was announced.

The company said its office rental values rose by 3.3
percent in the quarter across the portfolio, compared with the
2.9 percent increase recorded for the previous three months.
Retail rents in its West End properties gained 1.3 percent.

OVERSUPPLY RISK

With a stream of big developers — such as Land Securities
(LAND.L: Quote, Profile, Research, Stock Buzz) and British Land (BLND.L: Quote, Profile, Research, Stock Buzz) — launching huge London
developments in the past year, Courtauld said he was conscious
of the risk of an oversupply, preferring to sign on tenants
before starting a project.

“There is a potential over the next 3-4 years we will see
(oversupply) again in various locations around London, and we
just need to make sure we either pre-let our projects or finish
them earlier than we think the main risk will arrive,” he said.

The company has 12 near-term development projects totaling
1.9 million sq ft, and 15 pipeline projects covering 1.1 million
sq ft that are still in the design stages, including the 100
Bishopsgate skyscraper in the City of London financial district.

Courtauld said it was likely the company will start building
the 925,000 sq ft Bishopsgate project this year, in a joint
venture with Canada’s Brookfield Properties (BPO.N: Quote, Profile, Research, Stock Buzz), but only
after it finds a significant pre-let.

“We do have an encouraging list of people that we believe
will be interested in the quality of this (Bishopsgate) space
… it’s too early for us to commit to anything but I’m
encouraged by the early signs,” he said.”

Great Portland said it has also restructured the London
lease of Italian bank Intesa Sanpaolo’s (ISP.MI: Quote, Profile, Research, Stock Buzz) UK
headquarters, extending the term — excluding breaks — from
less than three years to 10 years, in exchange for a lower rent.

“We also expect to increase our rate of disposals, recycling
capital out of a number of assets once we have completed our
value adding business plans,” the company said.

Courtauld added he has been “inundated with offers” from
strong candidates to replace finance director Timon Drakesmith,
who will leave to join its peer Hammerson (HMSO.L: Quote, Profile, Research, Stock Buzz) as chief
financial officer in May. [ID:nLDE70J13E]
(Reporting by Daryl Loo; Editing by Sinead Cruise and Andrew
Macdonald)
($1=.6287 Pound)
(See www.reutersrealestate.com for the global service for real
estate professionals from Reuters)