A new report published by Berlin-based financing consultancy Flatow AdvisoryPartners during Expo Real reveals a growing market for subordinate real estate financing in Germany.
The new FAP Mezzanine Report says institutional investors in particular are increasing their exposure to this segment, with family offices proving to be a reliable constant.
FAP founder and managing partner Curth-C. Flatow: 'The fact remains: capital is seeking deals. Subordinate financing is a firm fixture in the financing market and will continue to grow.'
Subordinated capital provided for real estate investments in the market analysed by FAP totalled €2.6 bn over the last twelve months. This has facilitated real estate investments and development projects with a total investment cost of approximately €17.5 bn during the current year.
Some 49% of capital providers offer finance throughout Germany, down from 60% 12 months ago. There is a significant increase in the percentage of investors focusing exclusively on the Top 7 German cities: now 17% compared with 7% in 2016. A further 34% provide financing in metropolitan regions (the 15 largest German cities), which is largely unchanged (2016: 33%).
The majority of development projects are financed with capital requirements of 5% to 10%, reflecting loan-to-cost (LTC) ratios of 90% to 95% of total investment cost. The average loan-to-value (LTV) ratio on existing property stands at 88%. The number of more risk-prone providers offering LTVs above 90% on existing property has risen year on year. Initiators contribute an average of 12% of the market value of a property as equity.
Methodology
There are currently 146 mezzanine capital providers active in the German market. Financing consultancy FAP analysed 40 of these. These comprised institutional investors (37%), funds (32%), family offices (20%) and financial institutions (11%), which include crowdfunding platforms and private banks.
Click here to download an excerpt of the report
