The third element is that STE last year prolonged 80% of its debt to mature in 2013 or beyond and is working on more disposals. It has loan-to-value at just under 60% but good cash-flow at 2.75 times interest cover ratio.

"What we are all about really is getting maximum cash -flow, having no empty buildings and delaying all development to wait for better days," he says. "We are totally opposed to do a capital increase; we just don't think its necessary and the shareholders certainly don't want it." STE's NAV is €88 per share - compared to its share price below €30. He concedes NAV might fall further but adds: "Why would we go for a discounted rights issue when we could liquidate the company in an orderly fashion and return shareholders at least €60? .. In the case of our current disposals interested parties ring up and say we are getting 0.7% on cash and you can sell us a building at 7.5%, yielding 10 times more! Please can we get round to the notary and sign up!.. People are going to wake up, I think. If you are pension fund or an insurance company you have to offer a return. People want something uncomplicated, very identifiable and instrinsic." STE was one of several property companies in Europe that offered a dividend payment in stock.

Inch, whose background includes a stint working for sovereign wealth funds in the Middle East and in the US with the RTC during the savings and loans crisis, says: "One has to differentiate in the current crisis between poor quality properties that will prove difficult to let and good buildings that the market wants. A half-empty building in La Défense is a liability because of the management costs. The projected rent for our development Topaz in Velizy will be around twice the service charges of La Défense! But it's also a question of perception: Banks or other companies downsizing can't rent a building in upmarket locations like Place Vendome at €700 sq.m. while they are laying off staff!"

But Inch is also concerned about the bigger picture in regard to the French SIIC community, currently capitalised at around €40 billion. "There has got to be some consolidation," he told PIE. "But with one or two exceptions like possibly Unibail or Mercialys, people are not really focused on offering investors what they are looking for - exposure to a specific class of real estate with specific management skills. Several companies appear large merely for the sake of it, boasting a mixed bunch of assets."

He says many French REIT managements defend the mix of assets because diversification is healthy even if the skills are not there. "I am not keen on the big conglomerations with lack of focus on assets," Inch says. " Our investors for example seek a company specialized in middle income office space in Paris and the greater metropolitan area. It can be logistics, medical homes, student housing whatever... The other thing is free float: Quite a few SIICs right now are controlled by Spanish investors facing severe financial difficulties. In fact this can be a terrific opportunity, looking at the bigger scale, to work out these companies and allocate the different asset classes to specific pools of management talent in order to recreate value."

STE for 2008 reported a slight fall in rental income to €70.6m from €72 million in 2007, but a net loss of €17 million, turning round a prior year profit of €92 million mainly due to a write-down of hedging instruments and asset depreciation. Its financial occupancy rate was 92% on a portfolio valued at €1.16 billion; the geographical spread of assets between Paris and regional centres was 55%-45% in value. Offices and business parks represented 51% and 29% of portfolio value, with some warehouses and light industrial. French REITs are not required to disclosed quarterly earnings but STE 1Q09 turnover rose 19%, of which rental income was up by 3.3%. While a further modest downward adjustment of NAV is anticipated at mid year reflecting a continued fall in capital values net cash-flow is projected to improve substantially primarily due to reduced finance costs.

One major concern of the two men is that banks in France are vulnerable to the private equity market which aggressively acquired large assets near or at the top of the market - and that to cushion the impact, credit institutions could seek to hike lending margins to the listed sector.

The SIIC representative association FSIF is forming a group to lobby the government on the problem. "We are concerned that the banks do not take advantage of the listed sector being relatively more financially solvent," Inch says. "The temptation for them because of covenant issues like LTV is to take advantage to increase margins and make life difficult for us because of problems with the others. In numerous non-listed holdings, equity levels are extremely low or even non-existant so that LTVs are completely shut out. No one has an interest in provoking anyone but we shall resist having the the banks walk all over the listed sector to make up for losses on the unlisted side."

Adds Waterland: "Our concern is that the private equity market is going to implode because they are far more highly leveraged than we are, and many don't have any cash-flow. You have to do big chunky deals if you're trying to produce 20% IRR for your investors; you certainly don't do that by acquiring a fully let warehouse in Toulouse! But our worry is that when our funding comes up, the consequences of the fall out in the private equity sector will impact everyone."