Who cut the cheese?

I read a great news item recently about a bank in Italy that accepts parmigiano-reggiano cheese as collateral on loans to cash-strapped local cheesemakers.

The maximum 24-month term of such a loan is equal to the standard time it takes for this type of cheese to age. The cheese is stored in climate controlled vaults that are supervised by cheese specialists. Holding U.S. $187 million in cheese, the vaults were the target of thieves earlier this year. Upon the thieves being apprehended and the stolen cheese recovered, the bank manager said: “Thanks heavens we caught the robbers before they grated it”.

What underlies this story is a recognition by the Italian financial community and Italy as a whole of the economic and cultural importance of the Italian cheese industry.

One of Canada’s most important industries is the commercial real estate industry. Directly employing 1.2 million people and representing 6% of Canada’s GDP, this industry forms part of the very foundation of our personal and economic lives. The structures it creates are the places where we live, work and shop.

The recent credit crisis has had a devastating impact on commercial project financing. However, the nature of our industry is cyclical. The current low is just more severe than the norm. Over time, the value of real estate has and always will increase.

Lenders have reverted to traditional approaches based on longstanding relationships, proven track records, and lots of security. Particularly in this environment, BRIDGE has seen firsthand the need to find creative solutions to financing problems: domestic and foreign investment, government subsidies and tax benefits, unusual forms of joint ventures and partnerships, looser terms and conditions, and different geographic and target markets. The projects that are currently underway in Toronto obtained their financing prior to the credit crisis. Because projects take years to design and market, a prolonged financing shutdown will leave us at a standstill for the next 3-5 years. That’s something that we as Canadians cannot afford to have happen.

What are your views on this important topic?

News item links:

“Parmesan producers bank on cheese: prized wheels used as collateral to secure loans while they age in vault” (Associated Press, August 21, 2009)

“Cheesy collateral keeps Italian credit flowing amid recession” (National Post, August 12, 2009)