Inflation across Europe is cooling down but interest rates are still at historical highs. Leading bankers and investment experts discussed at last month's CEE Property Forum 2023 in Vienna how their financing strategies were adapting.
Banks are happy to see that more asset classes are to choose from to finance than in the past 2-3 years – that was the overall impression while listening to the speakers in the Lenders and Borrowers panel of the event.
„Clients are coming from every angle, especially from the bond markets. They look around and see that more residential and retail projects emerge and need proper financing. That's a good thing, which is returning the financing market to the normal level. Currently, a lot of deals are on the table," said Dieter Knittel, Head of CEE, pbb Deutsche Pfandbriefbank. His bank is experiencing a growing demand from owners for refinancing certain projects, especially existing office complexes in capital cities and logistics centres. He added that larger portfolios are also on the list to be refinanced later this year and in 2024 in particular.
So, everyone was happy that retail was recovering quicker than expected. „Retail parks, convenience centres and retail warehousing are getting more attractive to banks," Zbigniew Korba, Partner, Head of Banking & Finance Poland, Taylor Wessing added. He also emphasized that the hotel sector might have another revival in the coming years as local investors show more interest, especially in obtaining some of the distressed assets. He gets plenty of phone calls from potential investors who are interested in innovative projects like student housing and care houses in Poland. He also mentioned that newcomer investors would buy office assets only in CBD-s of some large cities of the country, however, interest in industrial complexes was slowing down this year.
Participants agreed that though a good deal of money is available, structuring project financing has become more important than earlier. „Multiple financial structures should be created, mezzanine finance has become a vital part of those structures," Inga Chkhaidze-Heynen, Partner and Head of Investments at Revetas Capital said in her remarks. She expects central banks to keep rates untouched over the coming 4-5 months and that is to be eased not before next Spring. „One thing is clear: most of the transactions are blocked because the gap between sellers and potential buyers remains wide," she stressed.
Marius Persenea, Chief Operating Officer of IULIUS Company also spoke about general financial conditions and expressed his optimism about lowering the central rates in the first half of 2024. „Countries of the SEE region, including Romania, are suffering from that high level but inflation is also hitting very hard for all developers and end users. These two factors do hamper any major development to start this year”.
„The green aspect is also present at financing”, said Hannes Wimmer, Managing Director, Loan Capital Markets, Erste Group Bank AG. He does not see a major threat concerning the high central interest rate. „It is not a Matterhorn peak and it will come down because the economies are recovering. The speed of that recovery though may not be the one we expected but it does take place," he added.
Florian Schmidl, Tax Partner, Mazars Austria raised an issue which is not publicized enough: taxing of investment transactions. He said that the money spent on different taxes is mounting and depth finance become more expensive which is bad news „because usually financing from equity puts a bigger burden on owners than taking a depth.” The expert added that ESG and EU taxonomy is currently an issue for all players before making any transaction.
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