Sam Zell, the American tycoon and founding father of the public real estate industry, this month quashed hopes of a US-style REIT renaissance in Europe.
Zell told senior directors of leading European REITs that they had little chance of replicating the US experience of the early 1990s, when the mass “equitisation” of real estate laid the foundations for today’s $500bn market.
Zell was speaking at the annual conference of the European Public Real Estate Association (EPRA), whose latest research highlights “striking similarities” between Europe’s current financial crisis and the US savings and loan debt problems of the early 1990s.
EPRA’s study, which was unveiled in Berlin on September 6 and 7, shows that the listed property sectors in the UK and eurozone countries combined now account for 11% of the total market capitalisation of property stocks globally.
The study points out that in 1989, before its “turbo-charged” growth as part of a government-backed solution to the US debt problems, the US REIT market was smaller than either of the UK or eurozone markets today.
Though EPRA chief executive Philip Charls acknowledged that European REITs “are punching below their weight”, he claimed that “no other industry” could deliver the scale of investment and innovation required to kickstart economies and hit EU sustainability targets.
But Zell, who was responsible for creating three of the largest US REITs, told delegates: “You have 27 different countries and 27 different REIT laws and then you can’t cross borders because of currency issues.”
He added: “The reason that REITs have been so much less attractive and successful here is that they haven’t had a simple template. They haven’t had the transparency and accountability and predictability that are the hallmarks for successful public companies – disseminating information, dealing with their investors as customers.”
Zell pointed out that his Equity Group Investments has no property holdings in Europe, indicating that he is unlikely to change strategy. He said: “There ain’t no growth in Europe. What’s going to increase valuations?”