Some European real estate investors are still too optimistic about future lending terms, according to Assem El Alami, head of marketing property financing outside of Germany at Berlin Hyp/Landesbank Berlin. ‘The advice I give to our clients is to do your refinancing today, not tomorrow,’ he said during a presentation at the annual IPD conference in Frankfurt last week.
Some European real estate investors are still too optimistic about future lending terms, according to Assem El Alami, head of marketing property financing outside of Germany at Berlin Hyp/Landesbank Berlin. ‘The advice I give to our clients is to do your refinancing today, not tomorrow,’ he said during a presentation at the annual IPD conference in Frankfurt last week.
El Alami said European financiers faced two main economic hurdles: the weak economic environment and increasing regulation such as Basel III. ‘This will affect the liquidity and equity positions of banks.’
Under new Basel III regulations set to take effect between 2016-19, European banks are required to increase their tier one equity ratio from 6% to 9%. ‘That is an increase of 50%,’ El Alami pointed out. ‘That will impact significantly on the activity of banks. Their need for equity and liquidity will drive the contraction of the debt market.’
The size of the funding gap for existing loans that need to be refinanced will stifle capacity for new business even further, El Alami said. ‘It will still be possible to finance high-quality assets, but it will be more expensive. Acquisition finance will compete with refinancing.’
While the traditional financiers are retreating from the European real estate market, El Alami said he saw more debt funds and insurers stepping in to bridge the funding gap. ‘We’ve already seen cooperation between banks and non-lenders such as insurers in France. Maybe we will see more...The opportunity in global real estate is European debt.’
