2nd Cannes Session of Investors Club 

17 March 2010

Auditorium J, Palais Des Festivals

The Investors Club project has been run by the Guild of Property Managers and Developers for 2 years. The 1st Cannes session of Investors Club was held at MIPIM 2009. It attracted large audience and interesting speakers and had a good coverage in the professional media. The raised issues were kept in focus at the subsequent IC events held in the economic capitals of Europe. Challenges of 2nd Cannes session: to avoid a repetition and formulate new questions reflecting latest trends of investment market.

Inspired by first indications of spring after a long winter we chose the image of a first swallow hurrying the spring to come – first investment projects started or completed during the global freeze, expectations and strategy of investors and developers aimed at harvesting on efficient projects. The following topics were proposed to the invited speakers:

First swallows: post-crisis investment projects and activities in Russia and Europe

Frozen wings: challenges and pitfalls of “too early” projects

New nests: investment niches, refashioning of the Russian and world market

Moderator and panelists. The panel moderated by the publisher and market expert Andreas Schiller (Property Investor Europe and Schiller Publishing House) included professionals, which have managed to get things done in the changeable economic situation - Thomas Kurzmann, CEO of Europolis, Austrian-German Investment Fund, Dr. Holger Müller, Managing Director Real Estate of UFG Asset Management, Alexander Olkhovsky, Vice President of VTB Bank, Risto Hiekka, President & СEO of Vicus Ltd. Riitta Ekengren, President & CEO - ЕКЕ Group, Juuso Hietanen, General Director NCC Real Estate, Andrey Nazarov, General Director of Start Development JSC.

Discussion was preceded by the introduction of Serghey Igonin, Head of GMD Investors Club project who shared his vision of the project dynamics and told about its first outputs.

The level of discussion was set by Thomas Beyerle, Head of Global Research in Aberdeen Property Investors. Aberdeen’s visualization of the Russian market provided a good explanation of the Western investors’ attitude – in comparison with other European economies Russian ‘market curves’ show more dramatic rises and falls. But for the high risks, the summary of Russian market perspectives is quite optimistic (especially in comparison with neighbors). Aberdeen analysts expect surfacing above the bottom-line by the end of 2010. This observation generated a mini discussion on ‘when to buy/invest’ – now too early, 4th quarter of 2010 could be promising.

In 2009 investors had to pay for the unreliable economic weather forecasts. Europolis was definitely a swallow, the wings of which were kissed by the Russian frost. The fund stepped into Russian RE projects amidst the summer heat, when their value was high, and had to sell them amidst winter freeze, when it dropped. Thomas Kurzmann commented politely that sale of their share in a St. Petersburg project in December 2009 (though with a loss) testified to the market survivability. Thomas and Holger Müller remarked that during recession Western funds did not consider Russian market beyond the Moscow Garden Ring.

This point of view did not agree with the opinion of Risto Hiekka and Riitta Ekengren who completed their office projects in 2009 in Pulkovo area (St. Petersburg), far away from the Moscow prime sites, and managed to attract good tenants.

Alexander Olkhovsky refused to assess the project viability in the context of its location or situation in a concrete commercial property sector: each project proposal submitted to VTB for funding was screened and evaluated in accordance with the bank’s own cost-profit-risk analysis.

The wisdom of ‘right project in the right location is stronger than recession’ was proven by the developers having no problems with funding – both Andrey Nazarov and Juuso Hietanen told about the sustainability of projects completed at the time of recession. NCC has no doubts about the commercial success of projects started in Russia – the confidence is based on simple reckoning – at current Russian prices the Scandinavian quality will always find buyers.

In conclusion Andreas Schiller asked the panelists to share their vision of ‘new and safe nests’ for the first swallows. Investors and developers joined in the opinion that in the short-term perspective the economy- and middle-class residential projects in the big economic centers of Russia will show the best commercial performance - this is the ‘dual purpose’ property bought by Russians both for living and as a crisis-proof private investment at the time when economic diagrams show great falls after rapid climbing. And only swallows having strong wings and well-protected nests dare to fly high above the market turbulence.  

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