A Veteran’s Guide to MIPIM 2012

As someone who has been visiting MIPIM for well over a decade, variously as registered and unregistered, visitor and exhibitor, having driven there a few times, including via Vienna, flown to Marseille and various other means including the train – a few tips to ensure you survive and prosper from the experience.

Note: The following opinions are those of the author and in no way reflect those of anyone he has ever worked for or with, and are certainly not those in any way of the MIPIM organisers Reed Midem. i.e. they are free!

  1. Pace yourself, it’s a marathon not a sprint – it is not remotely normal in a working day to kick off with champagne breakfasts followed by mid morning aperitifs, wine at lunchtime, mid afternoon cocktails, early evening beers, champagne reception, supper with wine, and then wind down beers with your new best friends (well not outside of the nationalised banks anyway), – keep your H2O levels up, you are not questioning your masculinity by swapping grape or grain for some water!
  2. Business Card Recycling – rather than just throwing away the cards of people you have been polite enough to accept, but have no interest or reason in contacting again – simply keep the less interesting ones in a different pocket and give them out to others who you don’t want to hear from in future, and statistically speaking you might just join two lucky organisations together!
  3. Mini Kit – Alka Seltzer, Nurofen, Dioralyte, Berroca, Sun Block, Phone Charger, Continental Plug Adaptor, Chewing Gum, Extra Business Cards.
  4. Sensible Shoes – unless you wish to develop “cankles”, wear something comfortable.  Apart from wandering around the bunker looking impressed and getting lost, you will be standing at various events throughout the day, walking the length of the Croisette at least twice a day having held the beautiful printed invitation to the party upside down and been given completely false directions by a local. Add to that standing outside Café Roma looking interested and interesting, and then finding your way back to where you reside eventually.
  5. Pack a small folding umbrella in your hold luggage – it does occasionally rain in Cannes and golf umbrellas have sharp tips and are considered dangerous weapons by customs officials!
  6. Avoid bringing tablets or laptops to do presentations on – you might think you look cool carrying the latest tool from Apple etc, but you are unlikely to use it.  The low lying winter/early spring sun will mean viewing is impossible, anyway you might mislay it and then there will be only one tool!
  7. Casual Clothes – unless you have your own yacht or are arriving early / staying after, you will never wear them as all events are business attire, this also goes for swimwear!
  8. Language – although the waiters speak better English than many of the attendees from Britain, this is not always true of other staff such as taxi drivers, so make sure you know where you are staying. Be prepared with a few French phrases and remember as an ambassador for the UK to say “merci”
  9. Restaurants – just a short walk away from the Palais or the Croisette lie many little gems of coffee bars, restaurants and cafes, at a fraction of the cost of their expensive near neighbours. They also tend to be quieter for a business chat, remember you are often only paying for a view.
  10. Avoid the queues – arrive early, stay after. If you haven’t booked your flights yet, why not invite a loved one for a romantic weekend break, before or afterwards? Nip up to Isola 2000 for a spot of skiing it’s only about an hour and a half away, and car rental is very cheap.  Driving a Renault Twingo up the switchback roads is very Top Gear plus the airport is on the way back. You can also nip over to Antibes and dine in one of the many wonderful eateries including Le Brulot, where you can have anything you want as long as it is duck breast cooked to perfection in the old baker’s oven.

In fact, rather than taking a cramped and extortionate flight on sleazy jet this year, I may drive – Anyone fancy car sharing?

Meet the MIPIM team

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London’s Changing Demography Increases Housing Demand in London

An intesting article in The Economist last month on the changing demography of London blows away the old theory that people gravitate to the capital to go to university and work, then move away when the kids require more space, education or when they retire. What’s behind this change? – the lack of access to affordable mortgages and economic austerity for the forseeable future means that the young are forced to stay put and the grandparents are wanting to stay near to them.  The article further states that on current projections, London’s population will grow from just under 8m today to over 9m by 2031, which is equivalent to adding the entire population of Birmingham, our second city.  This demographic shift and resulting demand for more school places, more healthcare services and above all more housing, coupled with the current housing shortage and austerity measures that are squeezing government finances like never before is creating a perfect storm of a headache for London’s planners.  

The long-running housing crisis will not go away and it seems the problem will only get bigger. Adversity often breeds great innovation.

The Government are looking at alternative/innovative ways to increase housing supply and Mill Group are part of this discussion.  If however, the predictions for London in this article hold true – if action isn’t taken soon, it may be just too late…

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How should Government help encourage housing innovation?

Those that watched me give evidence to the CLG Select Committee Inquiry into Financing of New Housing Supply will have heard Grant Shapps tell the Committee that he had a willingness ‘to support new ideas’ but when asked ‘What do you need?’ the answer is often ‘Nothing’.

Mill Group would like to amplify that the ask is, strong Government support, which we are proposing can be demonstrated in two ways to support the market initiation of new models for housing investment.

Mill Group has created the opportunity for £30 billion of new money to be invested in the residential market that will have a massive impact on new housing supply over the next 5 years and beyond. But to unleash this, we need to overcome a common barrier -  the reluctance of institutions to invest in unproven models, particularly if these are focused on returns over a long term.

I strongly feel that Government endorsement and financial support of all worthy new models into the market via financially limited pilot schemes could break this impasse and speed up the adoption of new models and the arrival of substantial levels of institutional investment. Government’s investment would then be returned after the pilot’s successful conclusion.

Another ask, as I have mentioned in a past blog is to extend the New Build Indemnity Scheme to investors.

Government has encouraged mortgage lenders with the New Build Indemnity Scheme (now the NewBuy Guarantee Scheme) to provide sufficient finance to enable those with 5% deposit to buy new homes. We suggest that the NewBuy Guarantee Scheme precedent is a useful example of Government support for a new private sector model and ask that Government provide similar financial encouragement to institutions to provide investment finance to enable consumers to buy homes and simultaneously initiate a new investment market for institutions.

Our proposal is that Government also creates a New Build Investor Indemnity Scheme which will mirror the NewBuy Guarantee Scheme.  The provision of a Government underwrite would encourage investors to come forward in an analogous way to lenders. The legal structure difference between debt and equity is not in point as both providers of finance are at risk of capital value decline and consumer default.

Mill Group needs the Government to recognize that innovation has to be nurtured through its development stages if it wants to reap the rewards new ideas can generate.  So while we do not ask for legislation changes, (Co-investment operates within existing law) and are not looking for contributions through taxation or subsidy, we are saying that we need Government’s active and public support to establish this new housing tenure.

We would welcome thoughts from Investors and others with new residential models.

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Part 3: The Crystal Brick – What effect will a Double Dip have on the Sectors of Property?

Carrying on from my previous views on the short and medium term casualties of a second recessionary slide (the second half of the “Big W”), our attention turns to those who might just escape any economic peril, as any effects will not be felt for at least 18 months and given the unpredictability of the economic cycle and world affairs, as such might not be affected at all.

First of all I would like to say that those awfully nice chaps at IPD seem to be pretty much in agreeance with me so far. As I listened to them yesterday morning at the release of the latest quarterly results (and in doing so completing the 2011 picture), it seems we are certainly singing from the same hymn sheet – albeit theirs is somewhat more detailed and far more influential on our daily bread!

Amongst a fairly gloomy picture that IPD painted, the weight of money chasing the “Other” category, which includes Leisure, Student Accommodation, Hotels, Healthcare and most importantly Residential, is now greater than that going into either South East Offices or even Rest of UK Offices. Further positive proof if it were needed, is that property investors are looking to spread their risk and searching for the star performers of tomorrow. However the top performer, and the one most voted for as continuing to hold that mantle in 2012 and 2013 is still Central London Offices, with both the West End and City being the only sub-sectors to achieve double digit total returns. This is in no part helped by the developers catching so many colds that their risk avoidance has meant that the tap to the supply-side development pipeline is so nearly turned off, that we are looking at a trickle of new projects coming onto the market – don’t say I didn’t tell you!

In addition, the continuing dramas in the Eurozone and expected fall out amongst the “PIIGS” are driving the wealth (of those countries lucky enough to have some left) towards the safe haven of London. Some equity is being invested into the traditional sectors, but perhaps because it is more readily understandable and therefore empathetic, large amounts are going into Residential. The residential investment market is no longer the preserve of the small time buy to let investor.  Major institutions are now seeking to find ways to enjoy the record returns that this previously largely overlooked sector has enjoyed. This has not only seen it outperform commercial property, but gilts and equities too over the last 10 and 20 years.

Indeed such is the potential value of this sector to institutions that it is now to be incorporated into IPD’s overall index in its own right, and in doing so will now force every person in institutional asset allocation to make the call whether to join this party or not.  Given the information we have about it’s performance from IPD and others, perhaps with more of an axe to grind, it’s a brave soul who ignores residential in and around Greater London from now on. For one only has to look at what happened when IPD afforded retail warehouses the same status – it grew from a fraction of a percent to double digit status and the returns are on record for all to see. So as residential investment grows, it will eradicate the claims of those that feel its current IPD sample size is not enough to care about, and when we stand here looking into the barrel of this loaded shotgun called recession, remember that when Lehman Brothers collapsed, residential was the last of the UK real estate sectors to be impacted and suffered the least. Maybe it’s because people still need somewhere to live.

I must draw this to a close and in doing so declare my hand. Mill Group, who provide a lot of my daily bread, have a residential investment option that removes the traditional gross to net headaches.  If you would like to challenge, discuss or personally abuse me, please do get in contact – and any of you going to MIPIM this year, feel free to arrange to do so in person.

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Watch David Toplas respond to CLG inquiry – Financing the New Housing Supply

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Watch David Toplas respond to CLG inquiry – Financing the New Housing Supply

Mill Group’s CEO, David Toplas was on the witness panel today giving evidence at the CLG Select Committee   – Financing the New Housing Supply. Other witnesses included Castle Trust, Asset trust Housing and R55,  with the Rt Hon Grant Shapps MP, Minister for Housing and Local Government, Department for Communities and Local Government,  and Pat Ritchie, Chief Executive, Homes and Communities Agency.

Watch him giving evidence on Parliament TV and read Mill Group’s submission here

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Part 2: The Crystal Brick – What effect will a double dip do to the sectors of property?

Carrying on from my previous views on the short term casualties of a second recessionary slide, the second half of the “Big W”, our attention turns to those in peril in the next 6 to 18 months, or what we see as the medium term.

Firstly Shopping Centres – although arguably these are just consolidated high streets, they are managed in such a way that a small number of units can be vacant without upsetting the overall revenue streams too much. Indeed, a healthy churn rate can be viewed as a positive overall contributor as lower grade brands or low revenue generators can be replaced by more preferential tenants. However, just as a babbling brook at the bottom of the garden is considered a domestic bonus, a raging torrent outside the back door is not! Any significant chain closures, and their resulting distress sales, do nothing for the shopping centre owner and therefore investor. If there is simply not the demand or availability of new tenants to fill the voids – you can do the math!

The other factor in this sub-sector is the continued polarisation in the market, with the further development of the Westfield style mega malls having a demonstrable effect on the smaller regional siblings, where a further decline in footfall is all too self evident.

The widely reported fall in the Nationwide Building Society Consumer Confidence Index last week with its cautionary statement that “…the cost of living continued to rise at more than twice the rate of underlying wage growth, putting pressure on household budgets” was not very encouraging. Even less so, when added to last Friday’s Red Flag Alert report on the number of companies in financial distress from consultants Begbies Traynor, which highlighted a 24% increase in companies experiencing critical levels of financial distress compared with the same period in 2010. Together these seem to point to further uncomfortable times ahead – the unanswered question is though, when will we reach the bottom of the recessionary phase, and when can we look forward to some significant and sustainable economic growth? The answer is certainly not yet clear.

This brings me to the next area which starts to hurt, the Industrial / Distribution market. Arguably as soon as retail takes a nose dive, bearing in mind to maintain the highest levels of efficiency they operate extremely short supply chains these days, the effect on this distribution dominated market should be fairly rapid. However, long leases and clever legal contracts should delay the arrival of any pain, at least into the 6 to 18 month period.

Finally for this piece we turn to the regional office market. If you can afford to take a 10+ year view and have bought wisely, you should be able to sleep easily waiting for the cycle to return. However, if your redemption is earlier than that or you bought prior to the Lehman brothers collapse, significant external factors come into the mix. One prayed for solution would be that packages of government backed financial stimulus, direct and indirect, come to pass in the locality of your investment.

If one looks at the numbers who have aped Norman Tebbit’s rallying cry and got “on their bikes”, the increased levels of economic migrancy arriving in and around Greater London are not just arriving to escape the Euroland crises in the PIIGS and elsewhere including the former Eastern Bloc nations, they are actually starting to arrive by the bus load from other parts of the UK – perhaps now is the time to be regionally afraid.

As we have not perfected the art of teleportation, not least of humans but of office buildings too, a simple slow down or cessation of demand will have a negative affect on rents, capital values and any new development in the regions. The regional economic picture has been trading in challenged times for some years, and sadly has not followed the traditional gleeful “yellow brick road” cycle of London’s comparative prosperity as it has in the past. This is even more applicable to the secondary market, despite increasingly attractive pricing, for painfully obvious reasons. However a glimmer of hope here could be the trend towards conversion of certain office and industrial premises into residential use, but as it seems to be only economically viable on pre-1970s structures, those built in the heyday of the 1980s may well have to fester for the moment.

The final look into the 18 months plus category will be posted shortly.

Read my previous blog on the Short Term effects

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The Crystal Brick – What effect will a Double Dip have on the sectors of property?

By way of introduction, it is important to mention that this is written in light of many economic commentators recently coming out and claiming we are heading into that famed double dip – “The Big W”.  Although it was mentioned some months if not years ago, the volume of the clamour means, if nothing else, it could be a self fulfilling prophecy!

The first casualty of economic slowdown is normally consumer spending, which in turn affects goods and services, and then corporate prosperity, which leads to higher unemployment and thus the effect grows exponentially.

Over my next few blogs I want to explore the commercial casualties in the short, medium and long term. Let’s first look at the short term effects, by which I mean the next six months.

The first victim will be leisure, not just the attractions, but also hotels, pubs and clubs – the latter for whom are as much under the mercy of large celebratory gatherings such as Christmas and World Cups. It is the same for certain retailers such as supermarkets, but at least the Sainsbury’s of this world have food as an underlying and robust revenue line, and we all need to eat. Put simply the reduction in the money in a consumer’s pocket means less across the bar for their beloved pint.

Everyone has noticed a shop that has failed to re-open its doors since the Christmas rush. News of the demise or fall from grace of high street brands infiltrates our media on a regular basis. A couple of years ago the great British public was up in arms about the death of its much loved Woolworths, whereas more recent news is accepted as a sign of the economic times. There undoubtedly will be more casualties to follow with worrying trading statements coming out of many retailers, including some previously thought bulletproof brands.

This theme continues as consumers decide to make-do and mend, and not replace larger capital items such as cars and white goods, or pursue cosmetic upgrades such as new kitchens – cue the depressed look on the Out of Town Retail Park where window shopping becomes the daytime activity and the main out of hours pursuit becomes racing by joyriders – more headaches for the beleaguered owner!

Hotels remain a mixed bag, with the Diamond Jubilee and Olympics coming up, those that are located to take advantage will reap the rewards of visiting foreign nationals. However as virtually all summer Olympic host cities have slipped into recession within a year of the closing ceremony, their profitability thereafter maybe brought into question. Hotels in rural locations may too suffer from the consumer spending slowdown as will hotels that rely on the business traveller as corporate budgets get cut. Those who rely on the UK based tourism market could also suffer from the increased competition by overseas tour operators and low-cost airlines as they all vie for our holiday spending money, and tempt us to forget our domestic woes.

Student accommodation will face a number of issues, notably the restrictions on UK study visas, which will reduce the number of University’s cash cows – foreign students. We are all aware of the government’s announcement, and have seen footage of the subsequent protests in response to the rise in university tuition fees – the most blatant consequence will be that domestic students may now need to choose a course and university that is commutable from their parents home as a result, rather than their own digs in proximity to their seat of learning. Finally, as an investment, institutions have dived hell for leather for a piece of this UNITE dominated market, with serious concerns about oversupply and the high prices paid starting to surface.

I’ll look at the effect on other sectors in the Medium (6-18 months) and Long (18 months+) term including Shopping Centres, offices and Residential in my next blogs.

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Mill Group to give evidence to CLG Select Committee

Submission to CLG Select Committee – Financing New Housing Supply

Following advice from a number of CLG Select Committee members, we submitted a paper to the Committee to demonstrate how Co-investment makes an immediate and direct contribution to housing supply. We understand that the paper was well received and have been invited to give Oral Evidence to the Committee on 30th January 2012, which we are looking forward to. Our submission can be viewed here.

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Tipping the Balance in 2012

A Happy 2012 to you all.

We have an exciting few months ahead of us. The Greater London Authority’s (GLA) independently commissioned due diligence for our Investors in Housing proposition is soon to be completed, and should be available to all interested London boroughs. If you would like to discuss this with me, please do get in touch. We are also in advanced discussions with a number of segregated mandate investors and expect to reach a close within the next couple of months.

We are also pleased to support the annual British Property Federation dinner as one of the main sponsors. The annual residential dinner will be held in the splendid Gladstone Library at One Whitehall Place on the evening of 28 February 2012. Sir Bob Kerslake will be the guest speaker at the dinner. If you would like to attend and are not a member, a mention of Mill Group as a contact will get you the members rate. I look forward to seeing many of you there.

Our own event last September, saw Investors, experts and leaders in field come together to discuss the feasibility of ‘Residential Investment and the Institutions’.  Due to its success, we hope to hold another event for thought leaders to discuss how we can make some of the ideas that came out of the debate into a reality.

In March we will also be attending MIPIM to continue gathering support for Investors in Housing. Our focus is on innovation and change. We have a sound investment proposition, finally offering a way for investors to benefit from stable, long term returns from the UK Housing market through our product, whilst changing the face of residential investment.

We thank all our supporters to date. This year, it’s about tipping the balance.

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