OUTLOOK BRIEFING: Alternative lenders extend their grip on French financing market

A growing number of insurers are teaming up with traditional bank lenders in the French real estate market, Roland Fuchs, head of European RE Finance, Allianz Real Estate, told a PropertyEU Outlook Investment Briefing held in Paris this week.

‘We’re seeing more and more deals between banks and insurance companies. We saw the first deal with four insurers only two years ago, but now clubs deals are more and more the name of the game. French banks have understood this concept very well and are joining up with insurance companies to a significant and increasing extent. The mix and combination of these lenders in club deals is growing tremendously.’

The first real estate financing deal involving a group of French insurance companies was signalled in July 2012 and revolved around the refinancing of the Lumière Building in Paris acquired by US developer and Tishman Speyer in 2006 from Blackstone. In the first private placement of its kind, BNP Paribas arranged and structured the €472m bond issuance which was taken up by French insurers Cardif, CNP and Predica.

Fuchs pointed out that different types of insurers were active in different segments on the market. ‘It really depends on the insurance company. A life insurance company has to deploy long-term money and most of these players prefer fixed-rate coupons for their fixed-income books. Non-life insurance companies on the other hand have premiums that they need to invest and may be interested in short or medium-term horizons of two, three, or up to six years. In that case, there may be interest in providing floating rates for medium-term loans.’

Commenting on the growing number of alternative lenders, Dephine Benchetrit, partner at Finae Advisors, agreed that the market in France was definitely developing. ‘Insurers can be very competitive on large underwritings, especially when they may have been a potential buyer of the asset. We also advise debt funds as well as traditional bank lenders and I think we will see more of these combinations. Alternative partners will become a stable factor in this market.’

Benchetrit said US banks were becoming more active in the mezzanine and junior debt segment of the market in France, providing LTVs of up to 80%, with a view to syndicating the debt to other holders. Debt funds are active as well, she added. ‘We’re also seeing a lot of new lenders from the UK moving to France,’ she said, pointing to the likes of M&G and GE. ‘The competition is increasing.’

The Outlook H2 2014 Briefing was held at the Paris office of law firm Taylor Wessing. Click here to watch the videos and the presentation