Alternative lending may be on the rise in the UK and Continental Europe, but there is still a role for traditional lenders, according to Ronald Fuchs, head of real estate finance at German insurer Allianz.
Alternative lending may be on the rise in the UK and Continental Europe, but there is still a role for traditional lenders, according to Ronald Fuchs, head of real estate finance at German insurer Allianz.
Allianz Real Estate views traditional lenders not as competition but as a platform for cooperation, Fuchs told PropertyEU´s debt finance investment briefing held at the office of UBS in Frankfurt last week.
’As a strategic concept, we see more in partnerships between insurance companies and lenders. This could take different forms including a horizontal division of the risk. There is competition from alternative lenders from the UK in the French and German market, but they are not a replacement for banks and they will not overtake them.’
While the share of non-bank real estate lenders has risen strongly in the UK in the past two to three years, traditional lenders remain a force to contend with in Germany, Fuchs said. ‘We are interested in exploring whether there is a way of using both sources for the benefit of the client.’
Allianz Real Estate has done little lending in Germany in the past 12 months, Fuchs reported. ‘That’s not because we don’t like it because of the fundamentals. We haven’t seen the right risk-return profile and have therefore decided to invest more in other European jurisdictions like Spain, Austria and the Netherlands. We have a global budget and that needs to be sustainable on a long-term basis. It doesn’t need to be fed by local business.’
The Munich-based insurer does not pursue a single-country strategy but looks at where the opportunities are, Fuchs said. ‘In some years we don’t invest on the equity side, like in Spain in the past year. But we have lent in Spain.’ A similar picture emerges for Ireland, he added. ‘We haven’t bought on the equity side in Ireland, but we have invested via an equity fund vehicle. We don’t invest in each country at the same time and to the same extent.’
M&G Investments
M&G Investments is also interested in teaming up with banks, the company’s head of senior commercial mortgages Paul Dittmann told the briefing. ‘Banks can benefit from the origination side and they can also benefit from all the capital out there. They can even buy secondary loans.’
M&G Investments is, according to Dittmann, the largest investor in private real estate debt in the world outside the US. Roughly half of the debt business is located in the UK and the rest is in Europe, he added. ‘In 2012, we were the first alternative lender in Ireland. We were making a statement that the market had bottomed. We saw the same in Spain in 2011.’
In 2014, M&G became the first non-bank lender in the Benelux and just last month completed the largest acquisition financing of Dutch residential property since the start of the credit crisis with the granting of a €110 mln senior commercial mortgage loan. M&G is not active as an alternative lender in Germany, but does own some operating assets, Dittmann said.
