2 April 2012
Cautious optimism was the predominant theme at a more subdued Mipim this year, with lawyers intent on wooing the few cash-rich players
In days gone by the Mipim conference in Cannes was a byword for all-night partying on superyachts, lavish entertainment and epic hangovers.
But times have changed. Mipim 2012, held from 12-15 March, saw the real estate industry sit down and discuss the changing fortunes of their sectors. A diversification in the source of capital emerged; while financing remains tight, there is money out there for those who know where to find it.
Lawyers learned that they increasingly need to show value for money and competitiveness - not through the size of the networking yacht or the venue for the client dinner, but through legal skills and client relationships. These factors will be crucial as the sector continues its slow, cautious recovery from crisis.
What the lawyers saw:
Eric Rosedale, global real estate co-chair, Salans
This year’s Mipim will be remembered for the unusually cold weather and a touch of austerity in the air. The premier global real estate event is usually a good barometer of what lies ahead for the industry.
If the number of dark suits and boats in the New Port is any indication, 2012 is set to mirror 2011 in many respects. While the prospect of a meltdown in Greece has been temporarily averted, the eurozone debt crisis is far from over and is still weighing on European real estate investors. As a result, 2011’s risk-off theme is likely to continue into 2012, with investors focusing on a shrinking supply of core US and European money products.
The commercial real estate debt gap is also likely to widen and new debt funds, insurance companies and private equity will only be able to fill part of the need. Logically, this should lead to more forced sales, but the distressed market is still in its infancy in Europe, while the overall market outlook in the US seems to be brightening.
Generally, the bankers were in a sombre mood at Mipim while the Russians partied on and all eyes were on Asian sovereign wealth. All in all, not a bad outlook from Cannes for real estate, which stays solidly in a positive recovery mode.
David Jones, real estate sector partner, Ashurst
Anyone who attended Mipim before the recession would have noticed the large number of people invading Cannes during one week in March.
However, since the recession there has been a steady series of changes reflecting market conditions, culminating in the one that was most evident at this year’s event - everyone was there to focus on the business of real estate.
With far more manageable numbers and those attending armed with clear objectives of who they wanted to meet and what they wanted to discuss, the focus was on the cash-rich players in the market. As the availability of debt providers remains limited, those with access to funds were more prominent than ever.
Another interesting trend was the source of these funds. While traditionally the London real estate market has been dominated by waves of investment from one country or region at a time, it is now much more diverse - we are seeing investors and developers from many parts of the world looking to London.
With so much volatility in the market, London real estate is seen as a safe haven for investors. A leading global financial centre with a host of cultural and economic benefits, the city is also seen as a gateway to Europe, making it an attractive prospect for foreign investment.
With a clearer focus on facilitating introductions and discussions between players in the real estate world, it seems the economic crash may just have saved Mipim from itself.
Iain Thomas, real estate partner, Lawrence Graham
From the viewpoint of a real estate finance lawyer, the messages to be taken from this year’s event can be summed up thus: the optimism curve that was evident last year is still trending upwards; the arrival on the battleground of non-bank lenders can be seen as a hugely positive step, particularly for the bank lenders that have the appetite but not the balance sheets to write larger loans. The opportunity to buddy up with the insurance companies is a godsend.
There was concern, however, among some domestic lenders that the significant difference in capital adequacy requirements between bank and non-bank lenders has led to an uneven playing field. This debate will rumble on, no doubt.
Also, on the legal front, it is more evident than ever that relationships lie with individuals rather than the firms in which they reside. The movement of individuals and teams between firms, particularly in the mid-tier, has led to fragmentation of the panel firm system, so expect to see a different approach to - and outcome from - the next round of bank panel reviews.
The overriding impression from this year’s event is that the real estate industry is close-knit and resilient, and the sector’s response to the difficult events of the past few years has served to reinforce this. Cynics may reasonably say that this response is governed by self-interest, but such is the symbiotic nature of the relationship between those participating in the sector that this is an approach that should ultimately benefit all.
As befits a seaside town of the sun-kissed grandeur of Cannes, there was a real sense that the deckchairs were once again being rearranged to face eastwards in cautiously optimistic anticipation of the dawn of an era of sensible and sustainable growth and prosperity.
Bruce Dear, head of London real estate, Eversheds
Even Eeyore would be optimistic on the Côte d’Azur, and markets mock most predictions, so this Mipim review will be both too cheerful and wrong.
Our panel event gave a vivid snapshot of cautious and selectively optimistic sentiment. The panel described a debt-starved and austerity-constrained market dominated by (very few) trans-global, cash-rich players, with a focus on major cities, economic hubs and income and covenant strength.
Market-bearish but opportunity-bullish, they saw potential value in new funds, Property Authorised Investment Funds and reluctant owners, such as banks and governments, who need partners with equity. The debt vacuum and demographic change also offered interesting plays.
What about the real estate lawyers serving this market? You don’t need to be Mystic Meg to predict more consolidation and competition. A small number of big opportunities are being chased by too many lawyers, so we need a relentless focus on the few active sectors, products and clients. Underpinning this must be rigid financial discipline: clients with equity are good, clients who pay are better. If you are not stable and solvent, you cannot take opportunities.
Hubris will hurt you. Listen to your clients’ views and change what you do to match them - if you don’t, they will change you for another lawyer. Never fall into the trap of thinking your clients like law and will be impressed that you know lots of it. Too much law annoys clients. They want law to solve their commercial problems, not cloud them.
Stay informed about the economy, politics and the market. Ignorance will miss opportunities. Find the market bulls and follow them out of the sloth of bears. If you find them, keep quiet or you will be squashed in the competitor stampede. Lawyers chasing clients are more dangerous than a herd of hungover wildebeest.
Nicky Richmond, managing partner, Brecher
As a lawyer, I have organised many Mipim trips. I am not sure that any business came out of the planned stuff a few years ago - it was all about mixing in the melee of the Hotel Martinez after midnight while your feet were killing you.
These days, it is a far more sober event. The Martinez is civilised and it is no longer a mark of failure to be in bed before 2am.
This year, the diary was fuller than ever and while that can interfere with one’s ability to drift into interesting gatherings, meetings were generally useful, with people keen to extend their networks or to be introduced to others at the event.
With the raising of finance so difficult and the funding market so opaque, clients are interested to know who is really lending and what the rates are. Mipim is now chock-full of interesting money and the lawyers’ task is to match it to deals.
As a serious business event, and as the funding market is fragmenting even further as banks repair their balance sheets, Mipim is a good place to take the temperature of the global property market.
For firms with international real estate capability, it remains an essential component of your marketing strategy.
Simon Cookson, London real estate head, DLA Piper
Although this Mipim saw fewer attendees than previous years, that did nothing to dampen people’s appetite to explore opportunities.
There was a businesslike approach and no real sense of the exuberance of the past. Although I did not see many people who thought that 2012 would be better than 2011, there was a massive desire to just get on and do business.
It is now clear that, whatever phase of the financial crisis we are in, it is the ’new normal’ and most expected that as they left Mipim they would be back into a challenging environment without a market-improving change in the near future.
The chat among the Americans I spoke to was that they were encouraged by how things were going back home and, interestingly, it seems that a lot of US money is looking to find a home in Europe.
There were a lot of US investors at Mipim looking to invest at the slightly riskier end of the market, which was encouraging. I also noticed a lot of debt funds, private equity firms and sovereign wealth looking to invest amid a flight to quality and better yields further out, with a slew of poor-quality assets over the horizon.
Down to business
Every year the real estate industry gathers in Cannes for the Mipim conference - thousands of property professionals networking and marketing their business. Post-recession, real estate lawyers report that the event was more sober and business-focused than ever.