ezb

The European central bank: The path to further interest rate cuts and the associated challenges

The European central bank (ECB) may be facing another rate cut, after initiating the start of a new easing cycle in June. At their meeting on 12. September is expected, that the ECB will raise interest rates further 25 base points lowered. Given the similar signals from the US Federal Reserve, this step could be easier for the ECB members. But as soon as interest rates drop to about 3 % sink, The ECB's decisions are likely to become increasingly controversial. This suggests so, that heated discussions could arise about it, how best to keep inflation under control.

The search for the optimal interest rate

During the next two to three interest rate cuts from currently 3,75 % is unlikely to cause major disagreements among the ECB members, the discussions could become more intense, as soon as interest rates rise 3 % sink. Different views on the price outlook and the point, at which monetary policy should no longer slow down economic growth, could lead to heated debates.

Estimates for this critical point range from 2 % to 3 %. With inflation falling, markets and analysts expect, that interest rates could move closer to the upper end of this range by the end of the year. Many people expect it, that they finally settle at about 2,5 % will settle down.

Early signs of tension

Isabel Schnabel, Member of the ECB Executive Board, warned recently: “The closer interest rates get to the upper range of estimates of the neutral interest rate, the more careful we should be, to avoid, that monetary policy itself becomes a factor, which slows down disinflation.”

Room for interest rate cuts

The ECB representatives largely agree, that there is still room for further interest rate cuts, as consumer price increases are still in line with the forecast, that the 2% target could be achieved by the end of next year. After the first rate cut in June, further cuts are expected in September and December, and an additional reduction in October cannot be ruled out.

Disagreement about inflation

The opinion about it, how strong inflation is currently 2,2 % – could continue to rise, is split. While some members of the ECB fear, that easing monetary policy too quickly could fuel inflation, others are worried about the possibility of missing the inflation target, especially given the weakening economy in the Eurozone.

Statements from ECB members

Greece's Yannis Stournaras stressed the need, both about- as well as undershooting the inflation target. Portugal's Mario Centeno warned against this, that too restrictive monetary policy could cause economic pain. In contrast, Boris Vujcic from Croatia highlighted continued price growth in the services sector, while Bundesbank President Joachim Nagel warned against cutting interest rates too quickly.

The question, when monetary policy begins, to stimulate economic growth instead of slowing it down, remains controversial. The so-called neutral interest rate is difficult to determine, and estimates vary considerably.

A look at the different assessments

Some ECB economists estimate the neutral interest rate to be in a range of 1,25 % to 3 %, while others, like the French economic expert Francois Villeroy de Galhau, an area of 2 % to 2,5 % to name. This suggests so, that there is still considerable scope for interest rate cuts, before monetary policy could be viewed as restrictive.

A divided committee

The risk of stagflation in the euro area will make discussions about further interest rate cuts increasingly controversial. The Governing Council is strongly divided between the “doves”, who prefer a loose monetary policy, and the “Falcon”, which require a cautious approach. As ING’s Carsten Brzeski notes, the hawks will be more willing to cut interest rates, if economic growth in the euro area continues to weaken.

ezb, Markets

ECB warns of increasing risk for European banks in the commercial real estate sector

The European central bank (ECB) sounds the alarm: The fall in commercial real estate prices represents a significant risk for European banks and could lead to long-term burdens in the coming years. This warning from the ECB does not come out of nowhere, because similar problems have already led to turbulence in the USA.

In the United States there are mainly regional banks, who financed commercial real estate, felt the effects of the price decline. Recent interest rate hikes have brought some of these institutions to the brink of collapse. But the problem doesn't just affect the USA; The danger is also omnipresent in Europe.

According to Bloomberg, lending by European banks amounts to, that are secured by commercial real estate, on 1,2 Trillions of euros – a significant proportion of 8,3 Percent of the total loan portfolio. These figures come from data from the European Central Bank (ECB). Claudia Buch, Chairwoman of the ECB Supervisory Board, emphasized, that commercial real estate is particularly vulnerable and has an above-average proportion of non-performing loans.

The ECB has been following developments in the commercial real estate sector for a long time 2017 Exactly. It was determined, that some real estate companies have taken out loans, the repayment of which would become problematic in the event of rising interest rates. The pandemic has further increased pressure on the sector, as many jobs have been relocated to home offices, which led to a decline in sales in restaurants and shops. The subsequent rise in interest rates after the pandemic added to the pressure, because refinancing takes place under different conditions and variable-interest loans have to be revalued.

To deal with this risk, According to Bloomberg, measures are already being discussed in the ECB. It is expected, that banks will require higher collateral and take more risk provisions.

Another problem is the banks' lack of transparency regarding their loan portfolios. Since 2018 The ECB has the real estate portfolios of more than 40 Banks in Europe, Great Britain and the USA examined. It was discovered, that some institutions did not recognize the potential for significant losses and did not have sufficient information about their loans.

Jose Manuel Campa, Head of the EU banking supervisory authority EBA, warns banks about the long-term consequences of the fall in commercial real estate prices. However, he emphasizes, that the sector is not facing immediate systemic danger. Nevertheless, the example of the German Pfandbrief bank shows, how quickly a bank can come under pressure, particularly if it has significant exposure to the US commercial real estate sector.

Overall, the ECB's warning highlights the urgent need for European banks, prepare for the ongoing risks in the commercial real estate sector and take appropriate measures, to minimize possible stress.

Markets

The change in the Berlin real estate market: Price reductions and their effects

Amid the often inflated prices, which are offered in the relevant real estate portals for home ownership in Berlin, provides the expert committee for property values ​​in Berlin (GAA) a more differentiated insight. The data it publishes annually is based exclusively on notarized purchase contracts and therefore offers a more realistic perspective on the market. This data analysis shows, that the real estate prices in Berlin per year 2023 have fallen significantly for the second time in a row, which represents a notable change from previous years, in which prices tended to rise. The preliminary analysis of the expert committee shows, that both sales and purchase prices are declining in almost all sub-markets. The number of purchase transactions has also decreased, and around 19 percent up 17.451 compared to the previous year. This is in contrast to the 21.586 transactions per year 2022, which is a minus of 21 percent corresponds. The decline in monetary turnover is just as significant, which according to the experts 29 percent up 12,4 Billions of euros have fallen, compared to 17,3 billion euros in 2022. Price declines vary depending on the segment of the real estate market. While newly built a- and two-family homes are seeing a price increase, are residential- and commercial buildings and apartment buildings affected by price declines.

Condominiums and building plots are also showing a decline, although this is less pronounced. Current trends suggest this, that prices change over the course of the year 2023 have stabilized, however, at a lower level than at the beginning of the year. External factors such as the Ukraine war, rising construction costs, High inflation and rising building interest rates also influence the market. The impact of these factors is noticeable and leads to further reluctance among potential buyers.

Overall, developments on the Berlin real estate market reflect complex dynamics, that reflects both local and global influences. The further development of the market therefore remains of great interest and will be closely monitored.

Markets

Challenges in financing commercial real estate

Since then the interest rate landscape has changed, The market for commercial real estate is in difficult waters, something new- or follow-up financing becomes a balancing act. Mezzanine capital offers a potential solution, however, requires careful consideration.

During the years of falling interest rates and the continuous rise in property prices, lenders rarely had reason to worry about the repayment of their loans. New financing or refinancing of existing loans, be it for project developments or existing properties, turned out to be unproblematic, since the continuous increase in value always offered sufficient security.

But with the interest rate turnaround, the tide has turned. The market is now in a phase of reorientation and price discovery. Sellers strive for minimal loss of value, while buyers are hesitant due to rising interest rates, Buy real estate without a discount. Expiring financing can lead to problems, as new financing is often either not possible or is only offered at reduced conditions. In this situation, owners and project developers are forced, either to bring in fresh equity capital or to close financing gaps by taking out hybrid financing such as mezzanine capital.

Devaluation of the property can cause additional problems during the financing term, especially if financial metrics such as the loan-to-value ratio are broken due to this devaluation. In such cases, banks may require partial repayment of the loan or the deposit of cash reserves, which requires additional capital, which are not always available.

The reactions of credit institutions to such scenarios vary. Sometimes waivers are provided under certain conditions (so-called waivers) granted, while other institutions insist on partial repayment or even consider terminating the loan, if the loan is classified as at risk of default.

Debt funds as an alternative source of financing can help in such situations, by providing mezzanine capital. However, both the project and the mezzanine financing must fit the requirements of the fund. Because the demand is high, Mezzanine investors can currently choose their projects.

Higher risks are usually offset by correspondingly higher interest rates and possibly by participation in the company's equity or profits. Depending on the risk profile, interest rates can be well over ten percent per year, which may affect the sponsor's return on longer terms or higher leverage.

In cases of financing problems, sponsors must, Owners and external financiers work together constructively, about exploitation- or to avoid insolvency scenarios. Extensions or standstill agreements can contribute to this, to stabilize a project, but there are legal barriers, which are intended to protect the interests of other creditors.

If everything's falling apart, This can result in the realization of collateral and the insolvency of the property owner. Restructurings are becoming even more complex, the more creditors are involved. The senior secured creditor will likely wait patiently, while subordinated secured creditors may push for it, sell the property or take it over yourself.

The current phase in the commercial real estate financing market represents a stress test, which will show, which market participants master these challenges and emerge stronger from them.

ezb

ECB leaves key interest rate at high level

The European central bank (ECB) kept key interest rates unchanged at its last meeting, and it seems, as if the central bank was playing for time, when it comes to the first interest rate cut. After an unexciting session, analysts are left with the same impression, that the ECB will exercise patience. Investors must therefore continue to be prepared for a test of patience.

Interest rates in the euro area remain at a high level, as the ECB has left key interest rates unchanged for the third time in a row, as expected. The key interest rate therefore remains at 4,5 percent, while the deposit interest rate for excess liquidity of the banks 4,0 percent is. It is expected, that key interest rates will remain at their current high for a while. Interestingly, the Dax still rose by more than 100 points from his daily low.

After the meeting, ECB President Lagarde reported, that there is broad agreement on this in the ECB Council, that it “is premature, to talk about interest rate cuts”. The central bank will continue to strictly follow new data, and there are no fixed dates in the calendar for interest rate changes.

You can find graphical evaluations in ours Research area.

ezb

ECB meeting: No change in interest rate

Interest rates in the EU remain almost at record levels, like the European Central Bank (ECB) decided on Thursday in Frankfurt. The key interest rate remains unchanged 4,5 percent, which is the second highest level since the introduction of the euro.

Only per year 2000 The key interest rate was briefly higher and was then 4,75 percent. The banks continue to receive an interest rate of four percent on deposits with the central bank. This is likely to mean continued high costs for variable and new loans for households. On the positive side, savings account holders can now expect slightly higher savings interest rates.

The ECB's decision on interest rates came as no surprise and was in fact expected. Inflation in the euro area has recently weakened surprisingly significantly, while at the same time concerns about the economy are growing. Before this decision, the US Federal Reserve (FED) left the key interest rate in the USA unchanged for the third time in a row and promised interest rate cuts for the coming year.

Despite the expectations of many economists, that the ECB will also cut interest rates next year, ECB President Christine Lagarde recently warned about this, already proclaiming a victory over inflation. It is still appropriate, to stay vigilant, until the inflation rate reaches the medium-term target of two percent again.

Inflation in the euro area fell noticeably in November. According to Eurostat, consumer prices rose by 2,4 percent compared to the same month last year, after 2,9 percent in October. The ECB aims for stable prices in the medium term with an inflation rate of 2,0 percent across the entire currency area.

After an unprecedented series of ten consecutive interest rate increases to combat high inflation in October, the monetary authorities stopped tightening interest rates for the first time. Higher interest rates make loans more expensive, which can dampen demand and counteract high inflation rates. At the same time, more expensive loans are a burden on the economy, as credit-financed investments become more expensive.

The eurozone economy is showing signs of weakness. According to Eurostat, economic output shrank in the third quarter 0,1 percent compared to the previous quarter. In the second quarter, the gross domestic product was (BIP) one 0,2 percent grown, after stagnation at the beginning of the year. According to estimates by the federal government and economists, the German economy is expected to grow for the year as a whole 2023 shrink slightly.

Laws, Markets

Lower Saxony's building regulations face radical redesign: Building becomes easier, faster and cheaper

The Lower Saxony cabinet today presented a draft of a comprehensive amendment to the Lower Saxony building regulations, which aims at that, to speed up the construction process in the country, to simplify and make it more cost-effective. The draft law relies on a variety of measures, which affect both new construction and conversion of real estate.

Focus on conversion regulations for existing properties

The central component of the novella is one “Remodeling regulations”, which is specifically aimed at simplifying renovation work on existing properties. Construction Minister Olaf Lies emphasized the urgency of these measures in view of the current housing market report, which shows a significant need for more affordable housing. Another focus of the bill is the implementation of the am 6. November between the federal and state governments “Bau-Turbo-Pact”. This one aims to do that, to make the construction of new properties more efficient and faster. The planned entry into force of the new building regulations is for the summer 2024 planned.

Facilitation for renovation projects

To make the conversion process easier, The draft law provides for a number of innovations:

  • Adaptation to years of manufacture: Ceilings should be used in renovation projects, walls, Stairs and sound insulation only have to correspond to the standard of the year of construction of the entire property, no longer the current standard.
  • Deviations from standards: Under certain conditions, deviations from applicable standards for changes of use should be permitted.
  • Reduction of border distances: The boundary distances for conversions should generally be reduced.
  • Attic extension: Freedom from approval for attic conversions, even within unplanned interior areas.
  • Facilitation of increases: Elimination of the obligation to subsequently install elevators when adding up to two floors for residential purposes.
  • Changes to children's playgrounds: Elimination of the possibility, to subsequently require the construction of children's playgrounds in existing buildings.

In addition to the measures mentioned above, the draft law contains further innovations:

  • Approval fiction: Introduction of a temporary approval permit of three months for housing construction and mobile phone systems, if the authority does not decide within this period.
  • Recognition of type approvals: Type approvals from other federal states should also apply without restriction in Lower Saxony.
  • Reduction of boundary distances in new buildings: Fundamental reduction of border distances, even in new buildings.
  • Regulation for “Mobile Tiny Houses”: Improving the situation for tiny houses, which are to be properly constructed and later moved to another location.
  • Innovation clause for “Building type E”: Deviations from existing regulations for testing new construction- and living arrangements are made easier.
  • No obligation for vehicle parking spaces in residential buildings: The requirement for vehicle parking spaces when constructing residential buildings should be deleted.
  • Extension of the obligation for bicycle parking facilities: The obligation for bicycle parking facilities to also be extended to permanent users and visitors to residential buildings.
  • Expansion of process-free construction measures: This affects, among other things, higher mobile phone antennas.

These proposed changes are intended to improve construction- and conversion process in Lower Saxony to significantly simplify and thus cover the growing need for living space. The planned implementation of the amendment to the building regulations is scheduled for the summer 2024 take place.

Inflation

Inflation (VPI) 11.2023 – further decline +3,2%

Last November 2023 the inflation rate in Germany is expected to be +3,2 % be, which was the lowest level since June 2021 (+2,4 %) represents. The inflation rate is measured by the change in the consumer price index (VPI) compared to the same month last year. According to the results available so far from the Federal Statistical Office (You are ready) is to be expected, that consumer prices compared to October 2023 around expected 0,4 % will sink.

The forecast core inflation, which reflects the inflation rate without taking food and energy into account, is expected to +3,8 % be. In November 2023 The fall in energy prices in particular had an impact 4,5 % compared to the same month last year, had a dampening effect on the inflation rate. This effect resulted from the base effect due to the very high energy price level in the previous year. Additionally showed up, that food prices in November 2023 with +5,5 % compared to the same month last year, did not increase as significantly as in previous months. The final results for November 2023 will be on 8. December 2023 published.

At the same time, prices for longer terms have fallen significantly again. You can find this and further information in our Research area.

Real estate financing currently

Tailor-made financing for real estate owner associations

The successful management of real estate in the form of owner associations requires more than just specialist knowledge, but also a solid financial basis. In this context, access to capital plays a crucial role, This is where our range of services as a financing advisor comes into play. Our focus is on providing tailored financing solutions for real estate ownership groups.

Advising real estate property management companies and real estate owner associations

FINANCE RE offers individual financial advice, that is tailored to the specific needs of each homeowners association. Through a careful analysis, we determine the capital requirements and develop tailor-made financing solutions, to ensure long-term preservation of value and sustainable management. Our team of advisors has extensive knowledge of various financing instruments. We don't just offer access to traditional bank loans, but also to community loans, Funding and other innovative financing instruments.

Competence and network in real estate financing

Thanks to many years of experience in real estate financing, we can select suitable financing partners. Our network and complete digitalization through our own platform help us do this, to obtain attractive conditions quickly.

The tendering process for real estate financing ensures independence and generates reliable offers for property management companies

The procurement of real estate financing takes place through a tendering process among the banks or. real estate financiers. As an independent consultant, we can establish a market comparison at short notice, which creates a selection of independent financing offers. This transparency leads to reliable financing offers that show the ownership associations a structured comparison of financing conditions.

Markets

Slight recovery in real estate financing in the third quarter 2023

Vdp member institutions are recording an upward trend

Those in the Association of German Pfandbrief Banks (vdp) Organized institutes reported a slight recovery in new real estate financing business in the third quarter 2023. With a volume of 30,7 Mrd. Euro shows an increase of 15,8% compared to the previous quarter, whereby the loan commitments for residential- and commercial real estate have increased equally. Despite the upswing in the third quarter, the year recorded 2023 compared to the previous year, a decrease of 21,5%, where the total volume of new business is 39,1 Mrd. Euros. The commitments for housing- and commercial real estate indicate a slight stabilization of the financing market, although the general conditions remain challenging. Jens Tolckmitt, General Manager of the vdp, emphasizes the recurring planning security due to the expiring dynamic interest rate rise. Loan commitments for residential real estate are increasing compared to the previous quarter 13,4%, while commercial real estate around 19% increase. However, both asset classes recorded declines year-on-year.

Commercial real estate financing dominates, but with a declining trend

The total volume of commercial real estate financing is 13,8 Mrd. euros in the third quarter. Office properties make up a share of 45% out, although the sufficient volume in the quarter- and year-on-year comparison decreases. The total portfolio of real estate loans extended by the vdp member institutions remains stable over the quarter 1.004,0 Mrd. Euro and shows a slight increase over the year 1,1%.

Markets

Real estate loans in Germany are rising again despite falling prices

The real estate market in Germany is showing signs of recovery. Prices are declining, while interest rates remain stable, what the demand for loans for houses, apartments and commercial properties. Nevertheless, the market remains deeply divided.

The German real estate market appears to be gradually recovering. Although prices have fallen more recently, Banks once again granted more real estate loans in the summer quarter. Current data from the Association of Pfandbrief Banks (VDP) show, that it was the third increase in a row, both for residential- as well as for commercial properties, compared to the previous quarter. Nevertheless, the minus is still over the previous year's value 20 percent.

Quote from VDP managing director Jens Tolckmitt: “The real estate financing business is still at a subdued level.” However, the foreseeable end of the rise in interest rates is clear to private individuals and professionals “increasingly more planning security again”. In October, the European Central Bank paused interest rates for the first time after more than a year and ten hikes. The loan costs for private developers and property buyers have recently fallen slightly, for example of good 4,2 to just under four percent for a loan with a ten-year fixed interest rate.

Market remains divided: Professionals on the rise, Private reserved

Nevertheless, the market remains divided: Banks' business with private individuals only increased slightly by just under seven percent compared to the spring. On the other hand, demand for loans for multi-family homes increased by more than 40 percent. Apparently, professional property developers and investors in particular have increasingly entered the market again, while house builders and buyers continue to be cautious. Prices tend to fall, but apparently not yet sufficient, to compensate for the significantly increased financing costs.

Quote from real estate expert Tobias Just from the University of Regensburg: “So far, the price declines have not sufficiently reflected the rise in interest rates.” Even in business with professionals, the total volume of new loans granted was still below the figure from the third quarter 2022.

Housing crisis continues, Commercial real estate market faces challenges

The housing crisis is not over. By September there were around 77.000 Fewer apartments approved than in the same period last year. Construction companies are also complaining about a wave of cancellations of older orders, which is causing the business climate in the industry to sink to new lows.

According to the VDP, business with offices in particular continues to collapse in commercial real estate. In the third quarter, a good ten percent fewer new loans were granted than in the spring and more than a third fewer than in the previous year. The corona pandemic has led to this, that many employees have not fully returned to their offices. The trend towards mobile working and home offices continues, which leads to increasing vacancies. Observers assume so, that fewer and fewer offices will be needed in the long term.

KfW funding

Federal Constitutional Court ruling affects state funding programs

The far-reaching effects of the Federal Constitutional Court's budget ruling also affect the funding programs of the state-run Credit Union for Reconstruction (KfW). In response to this, KfW has temporarily stopped applications and commitments in four residential areas- and construction programs imposed. From now on, no new applications can be submitted in coordination with the Federal Ministry of Construction, and all applications that have already been submitted will no longer be approved for the time being, as the development bank announced on its website.

However, it has been clarified, that promotional loans and investment grants for these programs that have already been promised are not affected by the budget freeze. These programs specifically include that “Renovate according to age”-program, the municipal funding program “Energy-efficient urban renovation”, the promotion of cooperative living and the BMWSB hardship program for housing companies due to increased energy costs.

Furthermore, there is the possibility, that other programs of the development bank are also affected. KfW announced: “We are in contact with all commissioning departments, whether the application- and commitment freeze must also be applied to other programs.” KfW receives funds from various federal ministries for investment grants, Repayment subsidies or interest reductions in bank-directed loan programs. The respective ministries are currently examining, which household titles, which they use for KfW funding, could be affected by the spending freeze, explained the development bank.

The effects of the Federal Constitutional Court ruling on the KfW funding programs are significant and have direct consequences for applications and commitments. The temporary ban affects certain programs, However, uncertainty remains regarding other potentially affected funding measures. KfW and the ministries involved are in intensive contact, to clarify the exact impact on the funding budget. It remains to be seen, how these developments will unfold in the coming weeks and what measures will be taken, to resume funding activities.

Liquidity procurement

Release liquidity: Innovative ways to raise capital for companies through real estate

In the general economic situation it is important for many companies, to obtain fresh liquidity and maintain a healthy liquidity ratio. It's like the elixir of life, which ensures and enables the smooth operation of an organization, to take advantage of opportunities, meet financial obligations and drive growth. But in today's highly competitive environment, traditional methods of raising capital can sometimes fail. This is where the power of real estate comes into play.

Uncover hidden reserves

Imagine a world, in which companies have the opportunity, to develop hidden reserves and thus secure the funds, that they need to be successful, without having to resort to risky loans or diluting ownership relationships. Sounds too nice, to be true? The development of liquidity through innovative real estate strategies. Real estate has long been associated with stability, long-term investments and a hedge against inflation. But what if?, if I told you, that it can also be a dynamic and flexible source of capital for companies? By leveraging their corporate assets, companies can unlock the untapped potential of their assets and turn them into a valuable financial resource. From developing equity in your own properties to entering into strategic partnerships, there are numerous innovative ways to raise capital, that many companies have not yet explored.

Real estate as a viable source of capital for companies

In today's competitive business landscape, companies are constantly looking for innovative opportunities, Raise capital and maintain healthy liquidity. An often overlooked route is the use of real estate assets. Real estate is traditionally considered a long-term investment, but can also serve as a dynamic and flexible source of capital for companies.

By unlocking the value of their corporate real estate, companies can tap into hidden reserves and secure the funds they need, without having to resort to risky loans or diluting ownership relationships. This approach enables companies, to capitalize on their existing assets and transform them into a valuable financial resource.

For example, a company may have significant ownership interests in its own real estate. By leveraging this equity, the company can access additional capital, that for various purposes such as expansion, Research and development or debt repayment can be used. This approach not only provides immediate liquidity, but also enables the company, to maintain control over its assets.

Development of equity in own properties: Use of company assets

An opportunity for companies, to release liquidity through real estate, consists of it, Build equity in your own properties. They take advantage of the increase in value of their properties over time, to generate additional capital.

Companies can achieve this, by implementing strategies such as property improvements or renovations, that increase the market value of their assets. By increasing the attractiveness and functionality of their properties, companies can earn higher rental income or even sell them at a premium.

Not only does this approach generate immediate cash flow, but also builds long-term equity, which can be used for future financing needs. It enables companies, maximize the potential of their real estate holdings while maintaining control of their assets.

Building liquidity through sale-leaseback transactions

Sale-leaseback transactions are another innovative option for companies, To release liquidity through real estate. In this arrangement, a company sells its own property to an investor and then rents it back for a specific period of time.

By concluding a sale-leaseback agreement, companies can access the capital tied up in their real estate, but continue to live in them and use them for their business operations. This approach allows for immediate liquidity infusion, without affecting the company's daily activities.

Additionally, sale-leaseback transactions offer additional benefits such as potential tax benefits and improved financial metrics. Companies can use the proceeds from the sale, to finance growth initiatives, Paying off debts or investing in new businesses.

Advantages and risks of real estate-based capitalization

Real estate-based capitalization offers companies, who want to raise capital, several advantages. First, it provides an alternative source of financing, which is not dependent on traditional credit institutions or stock markets.

This independence enables companies, to diversify their sources of financing and reduce their dependence on external factors, which could affect their ability to raise capital. Compared to conventional loans, property-based capitalization also offers greater flexibility in terms of repayment options and interest rates.

However, with real estate-based capitalization, as with any investment strategy, Risks associated. Market fluctuations can affect property values ​​and potentially affect the Company's ability to operate, to achieve expected returns on their real estate assets.

In addition, changes in economic conditions or industry-specific factors can influence rental income or occupancy and thus affect the stability of cash flow from rented properties. It is crucial for companies, to carefully assess these risks and develop emergency plans, to mitigate potential challenges.

Risks and challenges associated with real estate-based capital raising

While real estate-based capital raising offers exciting opportunities for companies, it also brings its own risks and challenges, that need to be overcome.

A key challenge is the valuation of real estate assets. Accurately determining the value of real estate can be complex and requires expertise in market analysis and property valuation. Companies need to hire professionals, that can provide reliable reviews, to ensure, that they use their assets effectively.

Another challenge is the legal and regulatory framework for real estate transactions. Companies must comply with various laws and regulations related to real estate ownership, Deal with leasing contracts and tax implications. Failure to comply with these requirements may result in litigation or fines.

Additionally, companies must carefully consider the impact of real estate-based capitalization on their overall business strategy. It is important to judge, whether the use of real estate assets is consistent with the company's long-term goals and objectives.

all in all, that unlocking liquidity through innovative real estate strategies offers companies a unique opportunity, Raise capital and maintain healthy liquidity. By using their corporate real estate, companies can tap into hidden reserves and secure funds, without having to resort to traditional financing methods. However, it is crucial for companies, the advantages, The risks and challenges of real estate-based capitalization must be carefully considered, before they go down this path. With proper planning and strategic execution, companies can unlock the untapped potential of their assets and secure their financial future.

KfW funding

Project development with KFW funding

Financial support for passionate visionaries in the construction industry

You are a passionate project developer and have big dreams for innovative construction projects, that make the city shine. But how can you turn your visions into reality? The answer lies in KFW funding. KFW offers financing options for project developers like you, in order to realize your plans and at the same time make a sustainable contribution to society. In this blog post we will look at the topic in depth “Project development with KFW funding” and provide you with all the important information and resources, that they need, to successfully implement your projects. But before we jump into the details, let me ask you a question: Have you ever wondered, how you can combine your passion for project development with financial support? If yes, Then you are exactly right here! Because in the coming paragraphs we will explore exactly that – the possibilities, that the KFW funding offers you, to make your dreams of impressive construction projects come true. We introduce you, how you as a project developer can benefit from this funding and what steps you should take, to successfully complete the application process.

What types of projects are supported by KFW funding?

KFW funding supports a variety of projects in different areas. No matter, whether it is the construction of residential buildings, the renovation of public facilities or the development of renewable energies, KFW offers financing options for project developers in various sectors. It is important to note, that the funding must meet certain criteria, to be eligible. This includes aspects such as sustainability, Energy efficiency and social responsibility. If your project meets these requirements, You can benefit from KFW funding and turn your visions into reality.

The importance of KFW funding for project developers

As a project developer, you face many challenges when implementing your construction projects. One of the biggest challenges is often financing. This is where KFW comes into play. Financial support from KFW can help you, To realize your projects and at the same time minimize the risk. The funding can contribute to this, that your project will be profitable and make a positive contribution to society. In addition, KFW also offers consulting services, to help you plan and implement your project.

The role of the KFW in project implementation

The KFW plays an important role in project implementation. In addition to financial support, KFW also offers technical and strategic advice for project developers. This includes evaluating project plans, assisting in the selection of contractors and monitoring the progress of the project. KFW works closely with the project developers, to ensure, that the project will be completed successfully and meet all required standards.

The different types of KFW funding for project development

The KFW offers various types of funding programs for project developers. These include low-interest loans, Grants and guarantees. Each program has different conditions and requirements, therefore it is important, Select the right program for your specific project. Some programs focus on specific areas such as renewable energy or social housing, while other programs are broader and support different types of projects.

KFW financing options for projects

KFW's financing options are diverse and can vary depending on the type of project. In some cases, you can get a low-interest loan, that enables you, Financing your project while making low interest payments. In other cases you can apply for a grant, who will help you with this, to cover part of the project costs. KFW also offers guarantees, that can help you, obtain additional financing from other lenders. It is important, Find out about the different financing options and choose the best offer for your project.

How to submit a funding application?

To submit a funding application to the KFW, you need to follow certain steps. First, you should develop and secure your project idea, that it meets the requirements of KFW funding. Then you have to create a detailed concept and collect all the necessary documents. These include business plans, Cost calculations and evidence of compliance with the funding criteria. Once you have prepared all the documents, you can submit your funding application to the KFW. It is important, go through the application process carefully and provide all necessary information, to maximize your chances of receiving funding.

Best practices for successful project development with KFW funding

To successfully implement your projects with KFW funding, there are some best practices, that you should pay attention to. Firstly, it is important, Start planning early and obtain all necessary approvals. Secondly, you should work closely with the KFW experts, to ensure, that your project complies with requirements and meets all required standards. Third, it is important, regularly monitor the progress of the project and make adjustments as necessary. By following these best practices, You can increase the chances of successful project development with KFW funding.

Ongoing management and monitoring of funded projects

As soon as your project is funded by the KFW, is it important, ensure effective management and monitoring. This includes regular reporting to KFW on the progress of the project as well as compliance with all agreed conditions and specifications. In addition, you should also make sure, that the project stays within the specified time frame and budget. Good communication with KFW is also crucial, to discuss any problems or changes at an early stage.

Pitfalls and challenges of KFW funding for project developers

Although KFW funding offers many advantages, There are also some pitfalls and challenges, that project developers have to face. One of the biggest challenges is this, Submit and ensure all necessary documents in a timely manner, that they are complete. Additionally, the application process can be complex and may require additional resources and expertise. It is important, prepare for these challenges and, if necessary, seek external support, to ensure, that your funding application is successful.

Successful examples of project developers with KFW funding

There are many successful project developers, who have benefited from KFW funding. An example is a housing project, which was financed by low-interest loans from KFW. Thanks to the funding, the project was able to be realized and now offers affordable housing for people with low incomes. Another example is a solar project, which was supported by a grant from the KFW. The project contributes to reducing CO2 emissions and promotes the use of renewable energy. These examples of success show, how KFW funding can contribute to this, to implement innovative projects and make a positive contribution to society.

Summary: Use the KFW funding, to realize your projects

KFW funding offers project developers a valuable opportunity, to turn their visions into reality. Through low-interest loans, You can use grants and guarantees to finance your projects while meeting sustainable standards. It is important, go through the application process carefully and provide all necessary documents, to maximize your chances of receiving funding. By working with KFW and adhering to best practices, you can successfully implement your projects and make a positive contribution to society. Use the KFW funding, to make your dreams of impressive construction projects come true.

FINANCE RE supports you with KFW funding

Only through KFW funding can projects be economically implemented in the current difficult financing environment. Contact us and we will discuss how financing your project can be set up and how this will help you in global sales.

Markets

The European central bank (ECB) raises the interest rate 0,25 percentage points up 3,75 percent and

The ECB is continuing its measures to combat inflation and is raising key interest rates for the seventh time in a row 0,25 percentage points. This decision was made by the euro monetary authorities under the leadership of ECB President Christine Lagarde in Frankfurt. The increase was expected by experts. The main refinancing interest rate is now 3,75 percent and regulates the interest rate, to which banks are located over a longer period of time (at least a week) Can borrow money from the central bank. The deposit rate, which is important for savers, is as of today 3,25 percent.

The ECB is thus following the American monetary authorities at the Federal Reserve, which also involves a more moderate interest rate increase 0,25 percentage points had been announced. It is the seventh consecutive interest rate hike, since the ECB in July 2022 has moved away from its long-standing ultra-loose monetary policy and initiated a turnaround in interest rates. Despite this renewed increase, the ECB has slowed the pace significantly. The central bank has increased key interest rates more recently, They were even raised by half a percentage point in March.

The turmoil in the banking sector in recent weeks has probably contributed to this, that the central bank is acting a little more cautiously and the key rates are only changing 0,25 percentage points increased. After the crisis at Credit Suisse and the collapse of two US financial institutions in March, First Republic Bank recently had to be rescued through a takeover by JP Morgan Chase. There is also a threat of another bank failure with the US regional bank Pac West.

To keep inflation under control, is the classic task of central banks. Higher inflation leads to a devaluation of money, as a result of which consumers can afford less and less for one euro. Interest rates rise, Individuals and companies have to spend more money on loans or borrow less money. This causes growth to decrease, Companies cannot simply pass on higher prices and ideally the inflation rate falls. But at the same time there is danger, that this will stifle the economy. In the Eurozone, inflationary pressure increased somewhat again in April. Consumer prices are up compared to the same month last year 7,0 percent increased. In March the rate fell significantly, von 8,5 percent in February 6,9 percent. The ECB is aiming for an inflation rate of two percent in the long term. “Inflation is like toothpaste: It squeezes out of the tube easily, but very difficult to get back in”, former Eurogroup leader Jean-Claude Juncker once warned.

Core inflation, which is currently receiving a lot of attention, fell slightly in April. In core inflation, foods are susceptible to fluctuations- and energy prices are taken out. According to the chief economist of VP Bank, Thomas Gitzel, The decline in core inflation could be the first sign of a turnaround in inflation developments. Despite the increased inflation rate, this is still not an argument for the ECB, stop the interest rate increases. However, there are signs of this, that banks have further tightened their credit standards in the first three months of the year due to the previous interest rate increases, according to an ECB survey. The chief economist at Commerzbank, Jörg Kramer, expects the key interest rate hikes to end soon. He assumes so, that the ECB at a deposit rate of 3,50 Percent will take a longer break after the next two sessions. In contrast to many financial market experts, Krämer does not expect any interest rate cuts next year, since the interest rate level is unlikely to be sufficient, to sustainably reduce inflation to two percent.

Dues, Markets

ECB increased on 08.02.2023 interest rates again

The Governing Council of the ECB has decided, the ECB's three key interest rates respectively 50 Basis points to raise. Accordingly, the interest rate for the main refinancing operations as well as the interest rates for the marginal lending facility and the deposit facility will become effective as of 8. February 2023 on 3,00 %, 3,25 % or. 2,50 % elevated.

The ECB bases its approach on the continued high inflation and the achievement of targets 2,0% inflation rate. The level of the US central bank FED is still well above the level of the ECB. To avoid imported inflation, the ECB is guided by, among other things,. on the behavior of the Fed.

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You can find further information on the ECB website.

Markets

The WORLD titled: “Condominiums are currently almost unsaleable”

The rapid increase in interest rates leads to capital costs for buyers, the one acquisition for “old” purchase price level hardly possible.

On the other hand, due to the time-lag effect, the production costs for land are on the same level “old” level logged in, the construction costs have risen massively and the leeway in the sales price for project developers is consequently limited.

At the same time, there is enormous demand in the rental market, Due to the high energy costs, energy-efficient new buildings are on the wish list of tenants.

Whether inventory holder or project developer, financing is becoming an ever greater challenge. We are at your disposal as a digitized financing specialist from a requirement of EUR 3 m. in partnership with solutions to the side.

Talk to us or start directly via our platform at https://anfrage.finance-re.de

Dues, Markets

New interest level- what strategies do real estate investors have & developer?

With a 10-year debut of approx. 1,7% (we were already over in May 2,0%!) we have the level of 2014 reached – and how are real estate prices behaving? These are currently still at the level of the beginning of the year. No wonder, The interest rate explosion took place in just one time 6 to 8 weeks.

How do you behave market participants?

Institutional real estate investors who traditionally used positive leverage, just like always, become full-equity investors in deals that are close to completion, to the extent that liquidity or funding commitments permit.

Project developers secure steel, although projects are not yet planned to the end. Many are waiting or postponing projects indefinitely due to uncertainties. Due to the strong price development for building materials or price guarantees of just once 8 weeks, if they still exist, there is almost no basis for calculation. Sensible risk limitation in real estate project developments can only go hand in hand with calculable positions.

Why have interest rates risen and is this sustainable??

First and foremost, you have to weigh up, whether the rapid rises in interest rates over the past few weeks are sustainable. Interest rates have already risen in the past year. The main reason for this was rising inflation and the associated general rise in interest rates on the capital markets. The war in Ukraine has caused already rising global inflation to explode, what the most important central banks in the world (especially the Federal Reserve) prompted them to raise interest rates and tighten their expansive monetary policy.

In addition, the war in Ukraine illustrates Germany's great dependence on fossil fuels and brings Germany's weaknesses to light. this leads to, that German government bonds are viewed as less safe and yields are therefore rising. The high correlation to federal bonds leads to a further increase in mortgage interest rates.

We assume so at this point in time, that it short- a peaceful solution to the Ukraine conflict will not be reached in the medium term and inflation will remain at a high level. This is forcing the ECB to act, and according to recent statements by ECB boss Christine Lagarde, an increase in key interest rates in the summer of this year is very likely.

An end to the rise in interest rates is probably a long way off!

What options for action exist?

Different strategies can be pursued depending on the risk affinity and the financing reason and term. This can range from variable rates to caps or (Part-)be interest rate fixing.

Obtaining liquidity by increasing the value of existing properties can be sensible variants, as can repayment models.

We are happy to help – or make a financing request directly:

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Dues, Markets

war in Ukraine – new interest rate level for real estate investments?

With the increasing likelihood of war by Russia in Ukraine, the numbers have literally exploded in recent weeks.

The 10-year swap rate had risen in February 2022 almost doubled to approx. 80bps and headed back towards March at the turn of the month 60 bps.

interest level 2010 vs. 2020

Real estate investors could in the decade 2010 – 2020 benefit from falling interest rates. Interest rates typically fell between the time the LOI was signed and when the interest rate was fixed. The interest rate assumptions from the purchase calculation were undercut by a lower interest rate fixing – the return on equity increased.

In addition to a sharp rise in inflation in the Eurozone, calls for an increase in key interest rates are becoming louder and louder. Limited to no oil and gas supplies from Russia are likely to 2022 continue to fuel inflation. The ECB will have to act. Consequently, increases in the key interest rate can be expected in the foreseeable future.

The current price level on the real estate markets was formed by a decade of falling interest rates. For current purchases with rising interest rates, attractive conditions are becoming increasingly important in order to invest successfully.

We are happy to help – or submit one directly Financial Request.

Markets

Advantages for project developers of real estate mezzanine capital

In a nutshell – what are the main advantages of Real Estate Mezzanine Capital:

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  • In a nutshell & In a nutshell: what are the main advantages of real estate mezzanine capital. what are the main advantages of real estate mezzanine capital

 

Markets

US FED considering rate hikes in 2022

As early as December, the US Federal Reserve announced that it was exiting its loose monetary policy. The Manager-Magazine confirmed this with reference to the minutes of the FED meeting. The main reason is rising inflation, which afflicts the currency watchdogs. 4-rate steps in 2022 are not excluded.

The decision of the FED mostly influences developments in Europe, at least indirectly, The US dollar is considered the leading currency in the world.

In December 2021 there was the highest inflation in the euro area since the introduction of the EU, nevertheless, the ECB is not planning to raise the key interest rate quickly. This is justified with the prognosis, that inflation during the year 2022 weakened again, it is therefore currently only a short-term increase. This would mean that no rate hikes are planned per se, if it does come to that, subject to a specifically persistently high level of inflation. So it remains to be seen for now, how the inflation rate develops.

Dues, Markets

Interest rate turnaround now initiated? Constant increase in the 10 year old “mid-swap”

For the first time since 2019 note the 10-year-old frets back to the zero line. As a target for the European markets, the 10-year US Treasury bonds have recently increased to approx. 1,75% attracted.

Let's take a look at the 10-year mid-swap rate, knows this since 17.12.2020 only one direction: From the stabilization at approx. +10bps from November a relatively steep increase in this week at approx. +32bps stands.

The markets have last seen this value in 06.2019 seen. Back then it has been around since October 2018 (Stand at approx. 1,0%) an almost continuous downward trend, one year later at approx. -0,27bps ended. So the market was in 12 Months by approx. 1,25% please.

Upward trend & volatility

The current upward trend has existed for a year with great volatility. The Covid-19 crisis does not allow medium to long-term forecasts, there like e.g.. with the Omikron variant, new, unpredictable influencing factors occur again and again. Market participants remain unsure of how things will continue.

What does the ECB say?

Rising inflation is also putting pressure on the ECB. The voices are clearly increasing, that interest rates need to be increased, to counter inflation. In December, inflation was up to last year +5,0% well above the original ECB inflation target of 2,0%. The ECB is currently assuming a short-term increase in inflation, accordingly, no adjustment of the key interest rate is currently planned. For the 2022 is based on an inflation rate of 3,2% went out.

for Real estate fund manager it makes sense to take action now and review your financing portfolio. We are at your side as a competent partner and look forward to meeting you news.