The property sector is relying more on bank financing than bonds at present and this trend is likely to continue across Europe, concluded speakers in the dealmakers panel of SEE Property Forum 2022, held in Bucharest.
Cristian Ezri, Chief Investment Officer, Yellow Tree, who chaired the panel, pointed out that inflation is one of the big concerns in Romania, which is driving the cost of financing. He added that as long as you develop an ESG-oriented product, you can attract financing on the long term.
“We have a preference for energy-efficient assets, for sustainability in general which makes a bit of a difference on pricing and priority,” explained Romulus Andrei, Director, Banca Transilvania. Speaking about inflation, he explained that a danger is a continuous high inflation situation, while the increase of interest rates could become eventually dangerous for every industry, not just real estate.
“Money is more expensive these days but we are in general interested in sale and lease back deals,” mentioned Andrei Koszti, Regional Commercial Manager, CTP Romania. The company has a portfolio of 2.3 million sqm of industrial spaces in Romania, part of which was purchased.
Kristóf Bárány CFA, Founding Partner, Adventum International, said that the biggest unknown is the war and the energy costs. Interest rates could go higher, but they are linked to inflation. He added that euro-based loans are still attainable, but investment-grade corporate bonds are priced at incredibly high yield levels. “We have invested in office and retail heavily in the past years, but our focus on the next years will probably be on cashflow,” he concluded.
Right now, the view of investors is that in 3-5 years, inflation will be lower than today. The bond market is gone from real estate for the short term, but alternative financing instruments are available regionally, explained Andrei Vacaru, Head of Capital Markets, JLL Romania. He went on to say that there is a lot of equity out there looking for projects, but everybody is looking for price adjustments.
Florin Tirla, Country Head Romania & Bulgaria, Indotek Group mentioned that the inflation is intercorrelated with the energy crisis and will hit us even more than we expect. This year, logistics and industrial were the most attractive, but we will see repricing on this asset class also.
Bonds are still a valid instrument, but it needs to be compared to the costs you need in your capital structure. Nowadays, things are moving towards bank financing more than on bonds, according to Andrei Svoronos, Principal Banker, EBRD. In Romania, there are opportunities for instance in logistics, same in office, he added.
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