Athens, Cairo Depict Top Global CRE Struggles
ATHENS—Two of the world’s oldest trading
markets, Athens and Cairo, have seen better days. Greece cut thousands of jobs in
February to help gain billions of dollars in
bailout from euro zone partners, and Egypt
has struggled to recover from the revolu-tion-spurred removal of president Hosni
Mubarak. Commercial real estate in the two
countries is locked in recovery mode.
Greece has made the biggest headlines
recently, as the country has taken billions
in bailout money from European finance
ministers and the International Monetary
Fund. The country’s troubles led the debt
crisis problems in the second half of 2011.
Now, it seems like the country’s leaders
have showed that the government is ready
to initiate austerity measures, though residents launched riots in protest.
Recently, L.P. Ellinas Real Estate
Consultants & Valuers, based here, joined
the TCN Worldwide organization. General
manager Evi Chaviara says she believes
Greece’s original entrance into the
European Community was one of the cata-
lysts for her country’s current crisis.
Debt Crisis: Elephant In the Room at MIPIM
In the midst of the hand shaking, deal making and the all-around
merry-making, one thing stood out at this year’s MIPIM Conference
in Cannes, France. While there was plenty of “cautiously upbeat
optimism,” there was little talk (except for a dour assessment by
keynote speaker and former German minister
of foreign affairs Joschka Fischer) about the
economic crisis affecting much of Europe,
including the full scale
Greek debt crisis that
now threatens to envelop
both Italy and Greece. It was the elephant in
the room of which no one spoke, and business
continued as usual.
In the meantime, major lending institutions in countries such as Germany and Ireland are bringing
record numbers of loans to market. Jones Lang LaSalle predicts
the European note sale market will rise to more than $20 billion
this year and be characterized by larger portfolio sales and
recovery rates meeting or exceeding book values. This is because
European lenders will face increasing pressure to deleverage
themselves of the large volume of debt coming up for refinancing through 2013.
Activity will definitely pick up this year as investors look to establish an early foothold in pioneering loan-sale markets. Over the
past 12 to 18 months, we’ve seen the note-sale market in the US
mature very quickly, achieving prices closer to asset value. We
anticipate this pattern beginning to develop in certain European
countries as the euro zone crisis and volatility in the debt markets
By Steve Collins
causes more investors to aggressively pursue seasoned paper with
bulk transactions for all types of notes across the risk spectrum.
Foreign lenders have begun the deleveraging process by marketing their US-based mortgages first as the pickings there are considered far more fruitful than in Europe. However, lenders are
expected to secure extremely strong pricing for notes attached to
major market, prime European properties as well.
Investors in the US have amassed large quantities of capital
to purchase such loans. But in addition, a corresponding number of lenders have also stepped up to offer financing for distressed mortgages.
As we predicted last year, for international investors looking
across the pond, secondary markets are piquing major interest.
Markets like Atlanta, Chicago, Seattle, San Diego, Houston and
even Pittsburgh shine brightly and are quickly becoming the belles
of the ball due to substantially higher yields. A new asset, with
investment-credit tenants and weighted lease expirations, will fetch
a yield of only 4.5% to 5% in New York City, while a similarly well-endowed asset in Atlanta will weigh in several basis points higher at
the upper 6% to 7.5% range. Different product types are also capturing suitors’ attention, especially high-street retail.
So while the European debt crisis simmers on, international
investors are turning to the US for safe, transparent and profitable returns.
Steve Collins is a managing director, Americas, with Jones Lang LaSalle’s
international capital group, based in Washington, DC. He may be contacted at
firstname.lastname@example.org. The views expressed here are the author’s own.
Vital Signs...New York tops the Global Cities Index, but Beijing and Shanghai may rival it in 10 to 20 years.—A. T. Kearney
8 REAL ESTATE FORUM APRIL 2012