1st Real Estate Finance Day: Bringing together what belongs together
"Loans are much cheaper in this country than in Scandinavia, for example, because Germany is overbanked," Matthias Moser, Group Head of Alternative Investments at Patrizia, informed the around 150 delegates at the 1st Real Estate Finance Day held in Frankfurt last week. Hosted by Frankfurt School Verlag and Targa Communications, this new event was aimed at bringing together representatives of the German finance and real estate sectors under one roof.
At the event, which was expertly chaired by Prof. Martin Faust of the Frankfurt School of Finance & Management, Moser was joined for the morning session by speakers such as Bilfinger Board member Dr. Jochen Keysberg, Hartmut Fründ of Ernst & Young Real Estate and Dr. Bernhard Scholz, member of the Management Board of Deutsche Pfandbriefbank. The issues addressed ranged from new models to improve the financeability of real estate projects and risk-adequate financing structures for non-core real estate to encouraging banks to finance commercial properties. The speakers kept their contributions short and to the point, so there was never a chance for the delegates from the real estate and finance sectors to get bored.
The chair compensated for the participants' initial reluctance to ask questions by skilfully querying some of the points the speakers had made. This soon broke the ice and the audience eagerly took the opportunity to dig deeper.
There were no signs of holding back from the participants in the ensuing panel discussion – facilitated by Werner Rohmert, editor of "Der Immobilienbrief", in his usual provocative style: Dr. Christian Glock, Managing Director of Bilfinger Hochbau GmbH, Ulrich Höller, CEO of DIC Asset AG, Dr. Bernhard Scholz, member of the Management Board of Deutsche Pfandbriefbank AG and Dr. Eckehard Schulz, Head of Real Estate Finance at the ERGO Insurance Group. It soon became obvious that Ulrich Höller considers the endless debate over so-called core real estate as extremely irritating and that, although insurers make an important contribution, they will continue to play a minor role in real estate financing. Banker Dr. Bernhard Scholz surprised the audience during the discussion when he openly blamed banks for fanning the flames in crisis situations – when misfinanced properties are transferred to them. The representatives of the real estate sector readily agreed.
After lunch, the delegates split up into themed break-out sessions. The choices were "Alternative financing of commercial real estate", "Current aspects of credit checks" and "Full cost analysis, third-party use and more".
At the session on "Alternative financing of commercial real estate", Michael Morgenroth, CEO of Caerus Debt Investments AG, and Michael Ullmann, Managing Director of Kapitalfreunde.de, demonstrated the uses of debt funds and crowd funding in real estate financing. The issue was then discussed with them by REFIRE editor Charles Kingston. He was joined by Lars Bergmann, Managing Director of Immobilien-Projektgesellschaft Salamander-Areal Kornwestheim, and Ralf Schlautmann, Managing Director of E&G Funds & Asset Management GmbH, who gave a rare insight into the financing options using real estate bonds, profit participation rights, bridge equity and NPLs. It became clear that these financing vehicles are all facing the same issues: Investors demand assurances of professional project evaluation and trustworthy platforms for handling the financing. There was broad agreement that only those providers would survive the coming years that subjected themselves to strict self-regulations and clear, realistic project evaluation.
On the subject of credit checks, Dr. Altfried M. Lütkenhaus, member of the Management Board of Frankfurter Sparkasse, explained in his presentation that the issue of core or non-core was completely irrelevant to him. What mattered rather was the decision about recourse or non-recourse financing. In his presentation, Manfred Kronas, Managing Director of GRR Real Estate Management, then explored how important it can be for a potential investor to involve his asset manager in the loan negotiations at an early stage. After all, the asset manager is the expert when it comes to providing the valuer with the right information, for example. On the other hand, continued Kronas, with Lütkenhaus nodding in agreement, banks like it when they get to know the future asset manager early.
In the "Full cost analysis, third-party use and more" session, Ulf Walliczek, Head of Real Estate at WealthCap, explained his firm's new investment strategy, which is aimed at maintaining and enhancing value during the holding period of investments. This is to be achieved firstly by replacing high energy users such as ventilation and heating systems with energy-saving equipment during repair and maintenance work that is scheduled anyway. Secondly, carpets, windows and materials should be replaced with cleaner, healthier products when there is a change of tenant. The audience reacted positively, but was at the same time somewhat surprised at this approach, seeing that for years investors had shown no interest in issues like energy consumption and maintenance.
Hans-Peter Richter, member of management at Bilfinger Hochbau, highlighted the advantages of a value partnership, which brings together investor, service provider and producer in the early development phase of a project. It allows the plans to be drawn up in such a way that construction time and building costs can be kept within budget and tenants and owners/investors can plan for secondary costs a long time ahead.
As a special treat for the joint conclusion of the event, the hosts had invited the architect and visionary Ardi Goldman. Dressed in denims, the individualist and out-of-the-box thinker gave a lively and extremely entertaining talk in which he explained that life is full of surprises and can change at any moment – and flexibility in thought and action is the only way to deal with it. As an example, he used MA*, a building designed by him in Frankfurt's Neustadtquartier, which was rededicated and adjusted several times during its realisation. Today it is a lively property with a quirky mix of retail, a body and soul floor and office use, thus adding an attractive asset to Frankfurt's city centre.
Conclusion: The premiere of this cross-sector event was a success. The 2nd Real Estate Finance Day is already being planned for May 2015 in Frankfurt.