A growing number of traditional bank lenders are moving up the risk curve, PropertyEU’s debt finance investment briefing heard earlier this week at the Frankfurt office of UBS.

A growing number of traditional bank lenders are moving up the risk curve, PropertyEU’s debt finance investment briefing heard earlier this week at the Frankfurt office of UBS.

‘Investors are attracted to anything with a yield,’ noted Daniel Mair, partner of EY’s German restructuring practice. ‘In Germany lenders appear to be more optimistic about the development space. A lot of financiers are around and we’re seeing an interesting mix of owners and financers.’

Pointing to the example of the new headquarters of the European Central Bank in Frankfurt, Mair noted that an ultra-high-net-worth individual had helped finance the office development. ‘Public debt is not interesting, so we’re seeing more interest in private debt and lenders moving up the risk curve.’

Development finance is returning to the market, agreed Roland Fuchs, head of Allianz Real Estate Finance. ‘The first development schemes are coming up again in Frankfurt and we’re also seeing their number rising in the UK and French market. Financing is becoming available again for speculative developments - not like a few years when there was nothing. Overall, there is no lack of availability of
lending in either the UK or Germany.’

Just a few years ago, development finance appeared to be in danger of going the same way as the dodo, noted Anthony Shayle, head of global real estate and UK debt at UBS. 'Fortunately it is not a rare beast or a unicorn, but it does involve necessary skills, close monitoring and an in-depth knowledge and understanding of the physical structure. The returns can be good but it is not without its risks and dangers. The crucial question is whether the underlying real estate markets are understood. I would advise caution if you can’t justify or validate the narrative of the developer.’