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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They told an industry conference – Real Estate Investment World Asia 2010 – that they believe the global financial crisis is not over and that it may take at least a year before economic recovery is certain.

Property developers were among those hardest hit by the global credit crisis two years ago. The crisis created tougher borrowing conditions and caused loan-to-value covenants to fall.

This shows the need to ensure sufficient liquidity for companies’ operations, observers say. Although the worst of the crisis appears to be over, they warn that the real estate industry may not be out of the woods yet.

Peter Van Rossum, CFO, Unibail-Rodamco SE, said: “I hope this crisis is going to be over soon. The reality though is that there’s still a lot of moving panels. If I look at Europe, particularly the Greek tragedy, 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.

“I think if you look at the stock markets, we’ve seen it just over the past week or so have been quite positive. But in the meantime, it just needs a little fragile piece of news to upset the whole balance again.

“I think, let’s face the fact that it takes another year or year-and-a-half before we know enough of all the issues that’s on the table, we know the impact, and then we can start the path to recovery.”

Observers say diversifying into areas such as hospitality is one way for property players to generate recurring income to mitigate cashflow concerns. Another option is to consider non-traditional forms of funding.

Thio Gim Hock, CEO & Group MD, Overseas Union Enterprise, said: “What we have learnt is that right now, perhaps the market has improved, apart from a little hiccup from the European financial situation.

“We’re looking at other alternative forms of financing, either long-term terms of financing that will ride us through all these ups and downs – I’m talking about bonds, convertible bonds, long-term financing – and we’re going to look at these instruments and get them as a back up ready, so that we can ride the rough waves that might come.”

Wen Khai Meng, chief investment officer, CapitaLand, said: “What we’re doing now is we’re looking for equity funding – develop our private equity fund business.

“Last year, we actually had to IPO, float part of one of our subsidiaries in retail in order for them to continue to have sufficient funds to expand.”

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

Standard Chartered believes the office and retail space, in particular, will be supported by strong projections for GDP and retail sales. It expects Asian retail sales to maintain a high single digit growth for 2010 and 2011.

Source : Channel NewsAsia – 22 Jun 2010

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