Corestate sees opportunity in widening funding gap

Real estate investor Corestate Capital believes the widening real estate debt gap in Europe offers opportunities for asset management specialists.

'The funding gap continues to widen, even in core European markets, such as Germany and France, despite an increase in capital allocation to these countries,' said Ralph Winter, chairman and founder of the Swiss-based company. 'As a result, many existing non-performing property portfolios will require professional asset management to bring them back to profitability even if acquired at significant discounts. This underpins our belief that the markets will present an increase in opportunities in the near future.'

Winter made the comments following the latest DTZ Global Debt Funding Gap report, which suggests the European Banking Authority's (EBA) Basel III regulation will contribute to a doubling of the Continent's debt funding gap over the next two years to around EUR 145 bn.

DTZ said the gap will widen despite the emergence of new non-bank lenders in the region such as insurance companies and specialist debt funds.

Corestate is involved in ongoing research on European real estate debt with the Real Estate Management Institute (REMI) at the EBS Universität für Wirtschaft und Recht in Oestrich-Winkel, Germany.

Their first report 'Distressed Real Estate Debt was published in November 2011, and they are working on a second paper that will provide a more detailed analysis of debt provision and its consequences for real estate markets and different asset classes. The aim is to develop models which will help turn non-performing portfolios back into performing real assets, Winter added.