2nd Frankfurt Real Estate Finance Day - organised by Frankfurt School Verlag and Targa Communications

The second Real Estate Finance Day, organised by the Frankfurt School Verlag and Targa Communications took place again last year in November, and now looks to have established itself as a firm fixture on the German real estate calendar. Over 160 participants took part in the event, ahead of last year's figures, according to the organisers.

With a number of very brief exceptions, this event consisted mostly of lively panel discussions, followed by interactive question-and-answer sessions. One of those brief individual presentations was given by Andreas Schulten, the CEO of market research group BulwienGesa, who characterised the current market climate for real estate financing in Germany as 'softening'. Given the current high price levels, he warned, caution ought to be the byword for investors looking to get into the market now, at any cost.

Finance providers are experiencing pressure on margins and rising costs of liquidity, while the bigger traditional financiers are looking to limit their exposure to ventures outside Germany's big seven cities.

This has opened up opportunities for alternative providers of finance, such as debt funds, insurance and pension companies, and new models such as crowdfunding. The crowd funding model as applied to closed-end funds was described by Dr. Thomas Beyerle, the head of research at Catella, as "the incarnation of evil".

In a quick riposte, Carl Francesco, the head of the crowd investing platform Zinsland, argued that his model was transparent and uncomplicated. He rejected accusations from Prof. Dr. Andreas Pfnür from the Technical University of Darmstadt that the crowdfunding model for real estate projects would entice fraudulent or non-serious developers to lure available "stupid money from overheated markets" and so to circumvent the normal regulatory processes. Von Stechow argued that the self-imposed regulation within the crowd funding community provided sufficient protection.

Panellists discussing the theme "'Real Estate Refinancing in Complex Situations" agreed that pension funds and insurance companies - as a rule - avoided complicated financing of real estate projects. This did not lower the pressure on classical finance providers' margins, however. According to Markus Kreuter, the team leader for debt advisory at JLL, there was always one bank that was prepared to break ranks and undercut the others, in the case where many banks had been approached to fund a project. The extra 20 basis points currently being borne by the banks as a result of stiffer regulation were often not being passed on to clients, for fear of being cut out of the deal, he said.

His views were underlined by Jürgen Helm, the head of real estate for Germany at HSBC, who confirmed that much real estate financing at the moment could not really be economically justified. The head of real estate finance at pbb Deutsche Pfandbriefbank also reminded delegates that a portion of current lending is "unsustainable over the long term."

Another factor which exercised a number of the investors present was the current scarcity of suitable properties available to buy. This often leads to investors shunning long loan negotiations with potential finance providers in the interests of securing the deal. Instead they prefer to use equity capital to lock up the deal, and then worry about securing financing from third parties later.

This was opening up new opportunities for companies such as K-Bonds, delegates heard from the company's founder Dr. Hans-Günther Nordhues. His company issues mortgage-backed promissory loan notes which are then placed with institutional investors.

Finding adequate financing is also complicated by companies buying up portfolios in different countries, with differing valuation standards, which can lead to confusion and delays in getting bank approval, according to Hugh Fraser from the rapidly-growing UK based M7 real estate.

Rene Reif from the Munich-based Rene Reif Consulting scolded companies who don't take into account bankers' needs when formulating their loan applications, and who need to be much more proactive in understanding a particular bank's priorities, in order to avoid time-wasting and irritation.

A concrete example of this was given to the audience by the Frankfurt School's own commercial director Karolina Kristic, who is currently managing the School's entire move to a new, purpose-built location on the other side of Frankfurt. This has required complex financial planning and negotiation, and she took us through the critical steps of the School's own loan application process, thankfully (she said gratefully) accompanied by very competent banking advisors.