Crisis not over: Global panel of property experts

It is important for real estate companies to continue to watch their cashflow, including keeping options open for alternative financing and find new recurring income, said participants at an industry conference yesterday.

They told the Real Estate Investment World Asia 2010 event that they believe the global financial crisis is not over and that it may take 12 to 18 months before the impact of the euro zone crisis is known and only then can economic recovery begin.

“We’re in the middle of Greek tragedy and nobody told us how many acts and scenes it has, so let’s see what the knock-on effect is going to be,” said Mr Peter Van Rossum, chief financial officer of Unibail-Rodamco SE in a panel discussion.

Property developers were among those hardest-hit by the global credit crisis two years ago, which created tougher borrowing conditions and caused loan-to-value covenants to fall. Observers said this shows the need to ensure sufficient liquidity for companies’ operations.

To mitigate cashflow concerns, property players need to diversify into areas such as hospitality to generate recurring income and consider non-traditional forms of funding, said experts.

“We’re looking at other alternative forms of financing, such as bonds and convertible bonds that will ride us through all these ups and downs,” said Mr Thio Gim Hock, chief executive officer and group managing director of Overseas Union Enterprise.

Some developers have, in fact, risen up to the challenge and made headway in raising money using alternative methods.

“We’re looking for equity funding – develop our private equity fund business. Last year, we actually had to float part of one of our subsidiaries in retail for them to continue to have sufficient funds to expand,” said Mr Wen Khai Meng, chief investment officer at CapitaLand.

For now, observers expect better prospects for Asia’s property sector, which will be partly boosted by capital inflows, amid expected currency appreciation in the region.

Source : Today – 23 Jun 2010

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