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European Real Estate Investors on Sidelines

07/05/2012 | By Carisa Chappell

Capital is waiting to enter the European commercial real estate market as investors look for signs of stability in the rocky economy, according to Saleem Ahmad, partner and global head of securities investing with London-based Tristan Capital Partners.

"When I look at the periphery, there are billions of dollars of capital sitting on the sidelines of Europe looking for that right time to enter," Ahmad said in an interview with REIT.com.

Investors looking for such signs probably appreciated the news on July 5 that the European Central Bank (ECB) is cutting its main refinancing rate by one quarter point down to 0.75 percent. In addition to cutting the main refinancing rate, the ECB also reduced its deposit rate to zero from 0.25 percent.

Ahmad said the decision to cut rates to record lows in hopes of revitalizing the economy signified a step in the right direction. Investors are watching to see if the European countries can form a stronger union and "pull through this fiasco," he added. Measures implemented to alleviate some of the general sense of uncertainty should help stimulate deal-making, according to Ahmad.

"I think some confidence-inducing measures are going to spur the floodgates of activity in the real estate space, particularly because supply is still relatively constrained," he explained.

Ahmad said the negative outlook for the region as a whole has created pricing dislocations for businesses that would otherwise be strong. He said macroeconomic headwinds and investors' perceptions are so powerful that even the best performing businesses are being affected.

For the time being, that means short-term volatility is going to remain high due to strong macroeconomic forces at play. For example, investors will be paying close attention to the unfolding story surrounding the European debt crisis.

For investors who remain unsure about the wisdom of investing in the region, Ahmad said it's a good time for "patient capital" to opportunistically take advantage of favorable pricing.

"I think good investors are the ones who actually don't follow the herd. I think it's a very compelling proposition to make money in Europe," said Ahmad, adding that he sees attractive investment opportunities in both the private and public markets.