German lender pbb Deutsche Pfandbriefbank expects to lend more on secondary real estate and form new alliances with alternative lenders in 2014, board member Bernhard Scholz has told PropertyEU.

German lender pbb Deutsche Pfandbriefbank expects to lend more on secondary real estate and form new alliances with alternative lenders in 2014, board member Bernhard Scholz has told PropertyEU.

In a sign that real estate markets are shifting, Deutsche Pfandbriefbank is adjusting its lending strategy to reflect the move on the part of its clients towards secondary real estate,Scholz said.

‘Overall our lending strategy hasn't changed but we are adjusting it to suit our clients' demands and their investment preferences. For example, there has been a move away from prime assets in markets such as London, Paris and Germany’s 'Big Six'towards secondary locations as investors seek better returns. As a result, we have financed more deals in secondary locations this year, a development which I expect to continue next year,' Scholz said.

Pbb did €4.9 bn in new business in 2012, a figure it expects to exceed for 2013, Scholz said. By the end of the third quarter, the lender had already underwritten €4.6 bn in new loans. ‘It is too early to talk about targets for 2014 but we want to further intensify our origination efforts and our goal is to top 2013’s new business figures,’ he said.

This year, pbb is likely to team up with insurers and debt funds to underwrite bigger ticket items: 'Club deals are important for us. We wouldn’t underwrite a deal of between €300 mln and €400 mln on our own. New players moving into the lending space such as insurers and debt funds only affect us marginally. They tend to finance ‘big ticket’ prime deals primarily in core locations. While new lenders are competitors, we also view them as partners. We have already financed some deals this year together with both insurers and debt funds and I think this trend towards cooperation will increase next year,' Scholz said.

The biggest challenge, according to Scholz, is to find ‘the right, stable real estate asset in a market where yields are under pressure’. 'Generally the market is quite positive today. Participants in the markets are increasingly professional,' he said.

Nonetheless, the lender has some no-go areas, namely serviced real estate of any kind, including senior care homes: 'It's not part of our focus today as we have not built up the necessary expertise in this area. But we don’t rule out entering this segment in the future,' Scholz added. The Pfandbrief market is also an important refinancing tool for the lender, for whom €4.4 bn of its €7.5 bn long-term funding up until the beginning of December takes the form of Pfandbriefe.