Lively launch of new Financing Conference for Real Estate Industry
The 1st Annual Congress on Financing for the Real Estate Industry kicked off in the Villa Kennedy in Frankfurt at the end of April, presented by financial structuring adviser Berlin-based BF.direkt AG and the IREBS International Real Estate Business School of the University of Regensburg, under the overall direction of conference organiser Heuer Dialog.
The well-attended gathering, incuding your editorial team here at REFIRE, participated enthusiastically in a lively day of discussions and presentations under the competent and engaging stewardship of Professor Dr. Steffen Sebastian of the IREBS.
The overall tenor of the day reflected the prevailing view that market participants are becoming more uncertain about the future direction of the market given the record number of new players now active in the sector, and the ongoing low level of interest rates. With liquidity costs rising, alternative sources of credit are becoming increasingly popular.
Prof. Sebastian summed up his view of the market: "Even in the event of a change of direction in interest rates, substantial rate increases over the coming years are highly unlikely. The biggest risk for the industry is likely to come from changes in regulation. Those who are not dependent solely on banks for their financing have got a clear competitive advantage." His view was strongly supported by Frank Jeschke of Stuttgart landesbank LBBW, who also sees regulatory changes as the main triggers for change in the financing environment in the coming years.
The opening talk was given by ex-Bundespresident Christian Wulff, whose statesmanlike presentation of Germany as a solid and desirable destination for real estate capital would have been at home in summit meetings with heads of state around the world. The ex-head of state and CDU prime minister of Lower Saxony is also on the payroll of real estate investor Corestate Capital since his deposing as Germany's president in 2012 when facing the prospect of prosecution on corruption charges – of which he was acquitted in 2014.
On real estate Wulff highlighted Germany's strength as a decentralised nation, with its numerous cities, towns and rural districts as having inherently stabilising characteristics, all helping to boost Germany's standing as an attractive investment location.
However, much of the earlier sessions were take up with discussion of the rising level of regulatory demands on finance providers, including higher minimum equity levels, all of which is making lending from classical sources more difficult, in the face of rising demand from borrowers.
Francesco Fedele, the CEO of conference sponsor BF.direkt AG, told delegates that alternative sources of financing would play an ever bigger role in the coming years. In fact, he said, these are being viewed as welcome and complementary tools from finance partners with an equally valid role to play in real estate financing, not least from the perspective of risk spreading.
The role the banks will play will be less a pure lender and more that of a service provider, deploying alternative financing as complementary structural elements of a sustainable financing package for clients, Fedele and a group of panellists concluded.
Ulrich Zick of Corpus Sireo among the panellists pleaded for banks to act as watchmen on client credit standings to more adequately price in risk in periods (like now) of effectively zero interest. Fellow-panellist Gerald Klinck, the CEO of residential housing giant Vonovia SE, put a convincing argument for greater issuing of bonds as a financing instrument on the capital markets thanks to their lower one-off and ongoing costs.
Hans-Günther Nordhues, of Nordhues & Cie LLP and bond issuer K-Bonds, highlighted the attractions of Schuldscheindarlehen, or promissory notes, an instrument only now beginning to gain wideer acceptance in the real estate sector (see article in this issue on Alstria Office REIT AG's latest refinancing).