Following the US and UK, countries in continental Europe like Spain and Italy may see more action from alternative real estate lenders in 2014, says Allianz Real Estate's CEO Olivier Piani.
Following the US and UK, countries in continental Europe like Spain and Italy may see more action from alternative real estate lenders in 2014, says Allianz Real Estate's CEO Olivier Piani.
In a preview ahead of ULI’s annual Paris conference in February, Piani says that the move into real estate lending by non-bank entities such as insurers and fund initiators will likely continue in 2014.
‘This has been a dominant feature of the market in the UK and US for some time, but logically there is a likelihood that this trend towards alternative forms of financing will begin to extend into new territories like Spain and Italy,’ says Piani. ‘In my opinion, once people feel more comfortable putting equity at risk, we will see an upswing in lending across some of the more exotic locations around Europe.’
However, he warns that insurance companies are still only able to fulfil a tiny proportion of the financing need in Europe. ‘Although they will undoubtedly want to do more, the overall amount of money coming through will still be limited and there remains some way to go before we are able to plug the lending gap.’
Allianz Real Estate itself, as part of an insurance company, has moved into the debt space and is targeting a €5 bn debt portfolio over the next three to five years, according to its real estate finance chief Roland Fuchs.
Allianz currently has about €1 bn invested in debt, largely in France and Germany. ‘‘Our strategy now is to roll out our debt strategy beyond the borders of Germany and France throughout continental Europe,’ Fuchs told PropertyEU in October.
Overall, Piani believes Europe’s real estate markets face similar operating conditions in 2014 to last year. ‘Despite what we hear about economic growth and upturns in employment data, I don’t think the real estate environment will change significantly,’ he says.
‘Although there is more liquidity and the financial markets are working more efficiently, margins will continue to be compressed for some time. A lot of financial institutions are willing to lend, but not at any cost, and if prices fall too far then, of course, they will stop lending for a while. Ultimately there are no quick solutions and, until the markets completely stabilise, some of the fundamental issues around funding will remain.’
Olivier Piani will be participating in a panel session entitled ‘Which Countries Are Really Getting to Grips with their CRE Loan Problems?’ at this year’s ULI Europe Annual Conference on 4-5 February in Paris