Commercial real estate financing in Germany currently adds up to a sum total of somewhere between 250 to 300 billion euros. A large share thereof represents classic bank financing, and about one tenth has been securitised in the form of CBMS. Given the sheer volume of the loans coming up for refinancing, the redemption of non-performing loans remains difficult despite the favourable interest environment and despite the steady recovery of the real estate markets. Then again, the buoyant climate on the investment market increasingly provides opportunities for selling assets at prices that are acceptable for the financing banks and credit servicers.
Tim Brückner, Client Group Leader Financial Institutions at CORPUS SIREO Asset Management Commercial, commented: “We expect to see sustained pressure on banks and servicers to find solutions for non-performing commercial real estate financings, and a persistently high potential for asset management services.”
According to a market analysis conducted by EBS Remi, market players put the share of non-performing commercial real estate loans at around ten percent, which would be the equivalent of approx. 25 to 30 billion euros. When asked about solutions for distressed loans, more than one in three bank insiders stated their intention to bring third-party asset managers in or else to sell the non-performing loans, the EBS analysis suggests. If you assume a realisation rate of only 20 percent, you would still get a loan volume of more than two billion euros prospectively in need of a new asset manager.
These assumptions are backed by a number of reasons that financial service providers cite to argue in favour of jettisoning distressed loans. On the one hand, the cost pressure and the pressure on margins, the tightening regulatory requirements, as well as the inferior refinancing terms connected to the poor ratings that result from high NPL holdings, all have increased the willingness to sell. On the other hand, however, the auspicious development of the real estate market – even outside the metro regions – and the lower discounts on the book values have made it easier to retail properties, and to clean up the bank balance sheets.
“The coming months will give us a clearer picture of the dominant factors. Especially regulatory pressure could trigger a rise in the volume of NPL traded,” said Brückner.
Ingo Hartlief, CEO of CORPUS SIREO Asset Management GmbH said: “Banks reduce commercial real estate NPL on the back of strong investment markets. The properties behind such loans are usually not prime assets, but management intensive properties well away from the metropolises. Successful asset management and sales activities require local market knowhow – available at the large, experienced providers of real estate asset management services in Germany. We expect an increasing market for real estate asset management services.”
About CORPUS SIREO
With a total of 16.2 million square metres of commercial and residential property space worth more than 16.5 billion euros in assets under management, the Cologne-based CORPUS SIREO employs a staff of around 560 professionals at eleven locations in Germany and Luxembourg. This makes the company Germany’s biggest asset manager. Accordingly, even rival companies rate CORPUS SIREO as their chief competitor on the market. (These are the findings of the “Real Estate Asset Management Report 2013” by Bell Management Consultants.) The company also won the “2012 immobilienmanager Award” for best company in the “Management” category.
To investors, banks, and companies with proprietary real estate portfolios, CORPUS SIREO offers investment management and asset management services along the entire real estate supply chain. Moreover, the company acts as estate agent and project developer for owner-occupiers and investors.
For more information, please go to: www.corpussireo.com
Follow us on Twitter: @corpussireo