GERMANY – Pension funds could play an "interesting role" in real estate financing in Germany, according to experts speaking at the Handelsblatt Immobilienwirtschaft 2013 event in Hamburg.
Some large German banks, as well as some regional players and mortgage banks, have exited the market for real estate financing, attendees heard, but other players have taken their place, including insurers and to some extent Versorgungswerke and pension funds, such as the German BVK, which provided capital on the Silberturm deal two years ago.
Florian Schoeller, chief executive at ratings agency Scope, said: "The BVK is a special case because it has a large team and always had a knack for real estate."
He added that most other German pension funds and Versorgungswerke would "jump on the bandwagon" and invest in real estate debt if they had the staff and necessary volume to afford it.
Others will invest in funds or "join forces" with insurers, as risk-management regulations "drive them" into indirect investments, he added.
Teresa Dreo, head of German real estate at UniCredit Bank agreed.
"Smaller pension funds in particular, investing €20m-30m, could provide second-tier capital by taking a bit more risk," she said. "In this area, pension providers could play a very interesting role."
Earlier today, iii-investments announced that it made its first purchase for its debt fund, bringing an additional institutional investor on board and increasing the total equity volume to €300m.
Deutsche Bank arranged the €30m loan purchased for the fund for the acquisition of a residential portfolio in North Rhine-Westphalia.
But Timothy Horrocks, chief executive at Henderson Global Investors in Germany, argued that debt financing from insurers, Versorgungswerke and other institutional investors was "not as competitive" as that from traditional banking sources.
He said he expected to see some upward pressure on margins in bank financed deals, but felt the spread between an all-in debt-financing rate and the initial yield for top assets was still "very attractive".
Schoeller said he was convinced "more and more" insurers would in future provide real estate debt financing as part of their standard business.
But Eckhard Brockhoff, founder of Brockhoff & Partner real estate, said he had "not really noticed" insurers or other institutional investors in the financing business, and that it would still be a "long and hard road" for them.
Instead, he predicted savings banks – Sparkassen and Volksbanken – would be most willing to take over as debt providers.
"External regulations like Basel III are influencing financing, making large banks more cautious," he said.
"But Sparkassen and Volksbanken have a lot of money they want to invest as people are trying to deleverage by paying off their mortgages."
Dreo added: "I do not expect a financing gap, as there is enough money on the market, and there might be a shift towards less regulated players."
According to Frank Pörschke, chief executive at Jones Lang LaSalle Germany, financing is only difficult in the non-core sector, where banks "hardly offer anything", while they willingly provided money in the core segment.
Horrocks added that only "a proven strategy and a strong relationship with the banks" was needed to get financing for second-tier projects in second-tier locations, while "financing is available in Germany up to a maximum of 40-50% debt capital".