From The Global Property Market conference: Development Courts Capital

An exclusive interview with  Jon Milward, Partner - Real Estate at Drivers Jonas Deloitte UK : Development Courts Capital

 
Equity investors looking for higher returns drawn to developers who need money in communities that need housing and office space
 
In the past, equity investors would buy an office building in a prime location with a government tenant and accept the steady income provided by the asset. These days, those situations no longer provide high enough returns. Equity investors are increasingly drawn into development.
 
“The weight of money looking to be invested into property is finding it difficult to make returns in the prime markets where it wants to operate says Jon Milward, Partner - Real Estate at Drivers Jonas Deloitte UK. “Higher returns are only available if they push up the risk curve.”
 
The situation is being exacerbated by a lack of capital available from traditional banking sectors since the debt crisis. “Those with money are being actively courted to get involved with developments and the developers who don’t have the money have to give away significantly larger proportions of the profits and control to those with the money, and that’s attracting the money to slightly more risky ventures,” says Milward.
 
Joint ventures to deliver assets to a community are also becoming more equal. “The structuring of joint ventures is getting more complicated and many are driven by tax considerations. Investors are setting up special purpose vehicles to lessen their tax burden. Some are even offering mezzanine financing to the developer to make up the developers’ share of the money that goes into a deal.”

on December 18, 2012