Gerald Ronson, chief executive of Heron International called on investors to accept responsibility for a crisis born of a ‘cocktail of greed coupled with inexperience’.
Speaking to an audience of 400 business leaders at the Heron Annual Lunch 2009 on Tuesday, Ronson said that the finger of blame had been pointed at banks, but that the crisis was ‘not their sole responsibility’.
While he accepted that the watchdogs, rating agencies and accountants responsible for monitoring the banks ‘simply did not do their jobs’, he told delegates:
‘You need to look at investors too; investors who have been demanding double digit returns without questioning how they are made. A cocktail of greed, coupled with inexperience has fuelled our problems. Money became too easy to be made rather than as a result of hard work.
‘The same applies to property – I could never understand how people could buy a property without ever seeing it. I visit all ours regularly and yet certain investors don’t ever go out and about. If you own an asset, to maximise its value you have to nurture it, manage it, think about it, not just wait for the quarterly rent to arrive because the danger is, it won’t. The result of this chronic lack of experience and expertise is an epidemic of insolvencies.’
He spoke of a ‘fog of negativity’ which had descended, and warned that ‘unless we think positively, we will be unable to rebuild the economy’.
Instead of indulging in negativity, Ronson called for ‘a return to basics and good, old fashioned property investment values where proper equity is put in; back to deals showing positive cash flow and conservative leverage’.
‘You can’t push a bus up a hill if the brake is on,’ he said. ‘I have always said the property is a long term business and that has never been more true than it is today. For even the simple squirrel knows that there will be bleak periods ahead and that, if it is to survive, it has to have reserves for the winter. We will look back at the short term traders and see too many amateurs.’
Forecasting the recovery, he said, was difficult because of what he described as a ‘dangerous’ lack of transparency combined with a lack of trust.
However, he said there would be ‘no short-term recovery’. ‘But when it does return, I do not believe it will rise in the same way as it has in the past.
‘The oldest book in the world refers to seven years of feast followed by seven years of famine. Let’s hope there are exceptions to every rule!’