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Friday Letter Party like it's 1991

Reminiscent of the last great property downtown, MIPIM 2009 was not the usual ebullient event. But as PERE discovered while on location in Cannes, veteran real estate investors are waiting determinedly for the music to start again. 

For real estate veterans who have attended MIPIM from its inception, MIPIM 2009 felt like 1991.

The French property show on the Côte d'Azur was far less crowded, the yachts were cheaper to hire and it was possible to get a table at a restaurant without booking the whole venue first.

With the price of a MIPIM party trading at historic lows, the PERE edit team opportunistically booked a venue of its own.

Five minutes’ walk in the sunshine from the main La Croisette strip and the Palais des Festivals exhibition hall, PERE hosted the first-ever MIPIM Breakfast at a restaurant.

The mix of guests was eclectic: opportunity funds, mangers of listed, core-plus and value added vehicles, placement agents, bankers (including the European Bank for Reconstruction and Development), one of the largest limited partners in Europe, and the global head of real estate at a magic circle law firm.

Our goal was to exchange orange juice, croissants and congeniality for market intelligence. Our notes from the event reveal a clear message: these players are in real estate for the long-term. Cycles will continue to cycle, prices will fall and rise, credit will tighten and ease, firms will shrink as well as grow, but from the creative destruction will emerge a re-energized private equity real estate industry, toughened from its tribulations and hungry for more growth.

Sure, everyone has challenges at present. Whether that be how best to tell an investment guy he needs to do more asset management, having to work twice as hard to raise equity for clients, dealing with the vagaries of marking to market, being unable to find a banker with a term sheet to your liking or having to suddenly switch to “work out” transactions for clients you previously helped acquire an asset – this market is providing its share of headaches.

Our guests shared many reasons why they believe real estate professionals will soon become very busy though. GPs and their placement agents are managing to raise fresh capital; opportunity funds are sensing the time to invest has nearly arrived; lawyers who advised on acquisitions in boom times are now advising on a wave of restructurings. Transactions, a markets lifeblood, were beginning to happen.

Not everyone will survive though. There was a lot of talk at MIPIM in general about certain funds that have gone “off-piste” and made bad investment decisions in unexpected ways. And questions were being raised about the future of the private equity real estate fund model at large Wall Street banks. In both cases change is already underway.

And change is arguably another key aspect of an energized, not prostrated, market. Sure MIPIM 2009 was smaller than 2008 but it will get bigger again. Remember 1991?

The PERE team

PS: You can get our detailed coverage of MIPIM and read the market views we gathered at our breakfast session in the April issue of PERE magazine.