The say on the street is that
there is a funding gap in the European property market. The say is also that
new players are coming along to fill, or benefit from this gap. These new
players are called debt funds, or insurance companies. Reports are piling up
announcing the raise of new funds, or the billions that this or this insurance
company is planning to invest in the new yield Eldorado. Advisors are warning
about banking regulation risks looming on the new sector, and offering advice… And
journalist have been writing about it (for instance here http://aox.ag/12tjxdn, here http://aox.ag/12tjw9c and here http://aox.ag/TbXMdh )
I have been wondering how much of
all of this is actually for real, and how much is there to help us sleep at
night. The white knights are coming to save our industry from its own cliff.
The fact is that there are a
number of high profile loans which have been put together by insurance
companies (not so much by funds so far). The Deutsche Bank and the Silber
Towers in Frankfurt, some prime assets in London… So there is some action going
in there. But is that really new? In the syndicated facility of alstria back in
2007 we also had AXA as part of the consortium with one of its debt fund
(alongside with 25 banks). Today we do have a fund from Deka as part of our
banking syndicate.
We also hear that unlike in the
US, insurance companies have never really be involved in the financing of real
estate in Europe. This is not exactly true. The lion share of the Pfandbrief
bonds (the German cover bond market which finance real estate across Europe)
are actually sold to insurance companies (although we could not identify any statistic
in that respect). According to the Vdp, the total amount of Pfandbrief loan
outstanding in Europe at the end of 2011 was around EUR 297 billion. The
pfandbrief banks granted EUR 90 billion of new real estate loan in 2011. This
compares with, for instance, Allianz target of EUR 5 billion loan book by 2015 (
http://aox.ag/UhbZHW )or the total EUR 2
billion of new loans by insurance companies in 2011…
From my perspective, the key
question in this debate is not really whether or not insurance companies will
step in the lending business. But are they going to do this with new capital,
or is the lending business just part of the existing real estate allocation. GE
Real Estate for instance (which I appreciate is not an insurance company, see
here http://aox.ag/T3EytC ) is stepping out
of equity, and coming back into debt. Net net, the move is neutral… No new
capital.
