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To: maceng2 who wrote (193213)	9/23/2002 6:19:17 AM
From: maceng2	Respond to of 436258

Going down (I can imagine a future insult could be... "You have less brains then an investment banker" ... pb) images.thetimes.co.uk timesonline.co.uk Office property boom 'in danger of turning to bust' By Jenny Davey LONDON’S commercial property market is in danger of overheating, a leading property investment manager has claimed. Banks are pouring money into high-risk real estate projects at a time when demand from tenants is falling away, exposing them to the risk of future default and refinancing. Lord Oakeshott of Seagrove Bay, the Liberal Democrat peer who runs Olim, the fund management company, gave warning that “greedy” banks and building societies and debt-backed private investors are pumping up interest in the property investment market while London office rents are falling. “Too many amateur investors have lost faith in equities at just the wrong time and are piling into commercial property as eagerly as they earlier embraced residential buy-to-let. They are paying hot prices and not getting a proper spread of investments,” he said. Lord Oakeshott said that “the risks now outweigh the rewards” and suggested that “buying equities from the frightened” would be a better bet. The London investment bonanza, which has seen an estimated £2.5 billion of property sold in the City and West End so far this year, has been triggered by the easy availability of cheap finance. Five-year money rates are at historic lows of 4.6 per cent and many investors are choosing to borrow between 80 and 100 per cent of property values. Bidding from private investors has also accelerated as a result of panic about tumbling world equity markets, an over-heated residential property market and low gilt yields, which have left few alternative investment options. Mark Shipman, an investment property adviser at Michael Elliott, the surveyor, said that demand for commercial property is exceptionally strong at the moment, particularly from private Irish and Middle Eastern investors, family trusts and funds run by companies such as Matrix Securities and Close Brothers, the investment bank. This week, a private overseas investor is understood to have agreed terms to buy the Mayfair headquarters of HSBC for £125 million, at a return of just 5.75 per cent. While investment soars, rents are plummeting. In Central London, office rents have dropped from £87.50 to £72 per square foot in prime West End locations, while in the City, the price per square foot has fallen from £65 to £52 over the past year. Lord Oakeshott said the banks are also starting to take enormous “punts” by putting up expensive mezzanine finance, a halfway house between debt and equity, and even their own equity into deals. Mike Prew, a property analyst at Schroder Salomon Smith Barney, believes that some investors who have minimal equity in their property investments could be leaving themselves open to refinancing risks in five years’ time if rental growth is flat or interest rates rise. Mr Prew argues that next year the investment market will become more closely linked to rents, which will lead to a slowdown in the investment market. Heavy job losses at City investment banks have increased the overhang of unwanted office space.