EUROPE - An Austrian law firm has set up a "one-stop shop" for the restructuring of distressed real estate in central and eastern Europe (CEE).
Re-Structure, launched by Vienna-based Wolf Theiss, will operate in 12 countries in the CEE region and will be led by chief executive Olivier André Frühwirth, formerly vice president of real estate restructuring at Investkredit Bank, and board member Peter Oberlechner, head of real estate law at Wolf Theiss.
"In the wake of the crisis, an increasing number of real estate projects in central and eastern Europe have come under considerable strain, reaching a critical limit," said Frühwirth.
He cited a "lack of resources" in the markets as a hindrance to effective restructuring and the maximising of returns.
"The markets were literally calling for a solution to this problem," Frühwirth said.
Re-Structure will offer advice and management services to banks and other institutions financing property projects in the region that have become distressed.
The launch comes at a time when the two largest Austrian banks, Raiffeisen Bank International and Erste Group, as well as the Austrian UniCredit, subsidiary suffered downgrades by Moody's for their exposure to CEE.
"The rating downgrades for the three major Austrian banks reflect their vulnerability to the adverse operating conditions in some of their core markets in Central and Eastern Europe and the Commonwealth of Independent States (CEE/CIS) and the increased risk of further shocks from the ongoing euro area debt crisis," Moody's noted in a statement.
Frühwirth's former employer Investkredit is a subsidiary of the Volksbanken AG, a smaller Austrian bank, which suffered considerably because of its CEE exposure and had to be bailed out by the Austrian government.
However, in a statement made on Austrian radio, Ewald Nowotny, governor of the Austrian National Bank (ÖNB), said that he "preferred" Austrian banks having exposure to the CEE region rather than Southern Europe.
Meanwhile, Ernst & Young forecast an increase in credit transactions in the non-performing-loans sector globally, including real estate.
The company said a lot of the cases of distressed property can be explained by bad management and initial miscalculations.
"The increasing number of distressed objects and loans shows - among other things - the failure in the real estate asset management of the investors and in the lending practices as well as the loan monitoring of the financing institutions," Ernst & Young said in its latest Real Estate Trends newsletter.
It added that "especially foreign investors" had been calculating with comparatively short holding periods "in which the economic aims could not be achieved".
According to the latest RICS survey on distressed real estate the demand for distressed properties globally will increase and most countries will still see an increase in the supply.