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Improve gearing and liquidity to repair property reputation

Event’s chairman, Liz Peace, head of the BPF, has overseen a number of discussions with retail leaders in recent months to ease the plight of occupiers hit by the recession in a bid to maintain the close relationship property owners have developed with retailers.

Peace said the key to rebuilding the industry’s reputation was to be as transparent as possible, act fairly and treat its tenants like any other customers.

However, Peace also stressed that many large landlords had the interests of other customers – their investors – to protect at the same time as tenants. She said that making large concessions over things like rent could damage pensions held and other savings.

"The key to any brand is trust and the property industry is no different," she said. "It’s vital that landlords and agents act as transparently as possible, ensuring they are open with tenants and manage their assets effectively.

"However, we need a balance and we risk robbing Peter to pay Paul if we insist on cutting into property firms’ profits to shore up retailers. We need to remember that many large landlords are actually the pension funds and financial institutions that manage the savings of the man in the street. Their customers are not faceless moneymen but members of the public who have their pensions and savings tied up in shops or offices.

"Demanding massive concessions will not only hurt future development but hit the financial well-being of the general public.

"The funding behind property acquisition and management is incredibly complex, meaning it’s simply not possible to just rip up a contract half-way and change something like a rent level without damaging the value of a firm’s asset and incurring other knock-on effects."

Anthony Brown, chief executive, Lend Lease Investment Management UK & Europe, said: "Clearly the downturn has taken the shine off property for investors in both the listed and the unlisted sector.

"We all know that the level of debt associated with real estate has become a major issue, particularly where leverage has been applied to illiquid structures. We have to question whether that level of gearing is ever going to happen again given the lessons of the last 18 months. The future success of the industry will be about how fund managers, property companies and other owners approach the way they manage risk and how they are incentivised and rewarded by doing so.

"The fact that property has fallen significantly in value will help attract investment back into the sector but a significant liquidity premium to the risk-free rate is likely to exist for some time to come. So going forward as an industry we need to be a bit more realistic in what we offer the market.

"Much has been said around the landlord-occupier debate and occupiers, like investors, will increasingly differentiate between good and bad assets. However, assets won’t simply be judged on their quality, but also on the quality of the management. I would expect a much bigger differential between good and bad managers. The skill of managing property will come to the fore again and picking winners and losers will all be about skill in managing assets."

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