Commercieel vastgoed financieren in ‘zwaar weer’ VGM, 26 oktober 2013
Drs. Philip Zwart Nyenrode Real Estate Center
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Agenda 1. 2. 3. 4.
Introductie, stellingen en vragen Vastgoedfinanciering door banken Funding Vastgoedfinancieringsmarkt: de trends
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Warmdraaien… 1. Wie zijn de belangrijkste financiers op de financieringsmarkt voor commercieel vastgoed? 2. Wat zijn de belangrijkste trends in de Nederlandse vastgoedfinancieringsmarkt? 3. Wat zijn de belangrijkste financiële ratio’s voor vastgoedfinanciering? 4. Wat is een gezonde LTV voor de Nederlandse vastgoedmarkt? 5. Vinden de beleggers de Nederlandse markt te hoog gefinancierd?
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Warmdraaien.. 6. Wat is de gemiddelde LTV voor particuliere vastgoedbeleggers in 2013? 7. Wat is de gemiddelde LTV voor institutionele vastgoedbeleggers in 2013? 8. Wat is het gemiddelde rentepercentage in Nederland? 9. Wat is het gemiddelde aflossingspercentage in Nederland? 10. Wat is een spread?
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Warmdraaien.. 11. Voor wat voor termijn zouden vastgoedbeleggers willen financieren? En de vastgoedfinancier? 12. Hoe staan de vastgoedbeleggers ten opzichte van derivaten? En de financiers? 13. Naar welke alternatieve financieringsbronnen zoeken vastgoedbeleggers? 14. Wat zijn convenanten? 15. Wat zijn verschillen in financiering, gezien over heel Nederland?
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How do banks determine and price property risk? The 4 most important factors for assessing risk in property (re)financing:
– Loan To Value (LTV)
20%
– ICR
30%
– Average WALE
25%
– Quality and tenant diversification
25%
20% Value
80% Cashflow
•
Value decline through yield-shifts
•
But also value decline possible through decreasing rents
•
Banks increase their margins to price this risk
•
In addition to Requirements Basel driving up margins: higher capital buffer, less leverage, lower RoE, longer funding.
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Pricing of banks 1.
Base rate 1. EURIBOR / LIBOR (variable rate) 2. X yrs swap-rate (fixed rate)
2.
Liquidity fee (FTP) 1. Determined by the costs banks bear to attract funding 2. Directly priced to the clients
3.
Margin 1. Compensation for all internal costs plus the risk a bank is taking 2. The higher the risk, the higher the margin Vastgoefinancieringstarieven gebaseerd op 3M Euribor en 3-jarige lening
% 8 7 6
5 4 3 MARGE
2 1
LIQ. OPSLAG EUR3M
0
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Vastgoedfinanciering door banken
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TMB PZ 10-2013
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Prof. dr. T.M.
‘Staat hanteerde Europees waardebegrip bij nationalisatie SNS’ ‘De Nederlandse Staat heeft de leningportefeuille van SNS Property Finance bij de nationalisatie laten waarderen via een waardebegrip van de Europese Commissie, dat een hogere waarde oplevert dan de marktwaarde.’
Nationalisatie SNS (1-2-2013)
Vastgoedfinanciers worden in de periode 2015 – 2018 zwakker, niet zwakker of sterker, sterker.
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Influences on real estate finance market Liquidity Costs (funding, CDS) Economic conditions
News / press
‘The Wall of Debt’
Regulations
CRE Financing
(Basel III, Solvency II)
Challenging business
Market’s sentiment towards CRE in Europe
Banks’ sentiment towards CRE Valuations 15
Activa
Leningenportfolio
Passiva
Eigen vermogen Deposito’s
Obligaties Interbancair 16
RWA RWA is a function of the perceived riskiness of the asset
B/S
Available Capital
Regulatory Capital (8% of RWA)
RWA
Assets
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Riskiness of assets CRE loans example
Source: INREV – October 2012
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De-risking existing loan book Option for CRE lenders Negotiations with clients for additional de-gearing • cash sweeps • additional security • equity injections • new third party capital • property sales • enforcement
Significant workload ahead for all property lenders 19
Pro active loan book management
Various ways Reduce
• Exit clients: inform 6+ months in advance • Transfer loans: externally and continuation of funding projects • Bond markets: product push
Maximise top-line Re-price
• Market margin or more • PIK margin if deal cannot pay • Take % equity whenever clients cannot de-gear
Ability to sell each loan at par Liquid assets
• Transferability language / standardisation of documentation • Further align DD requirements with market • Introduce non-bank institutions in deals
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But deleveraging will take time European deleveraging cycle has just begun
History suggest 4-7 years post a banking crisis
Trajectory of loan/deposit ratio in previous crises
Trajectory of loan growth ratio
Source: MS Research: ‘Banks deleveraging and Real Estate’, March 2012
• • • •
Source: Bank of England, Financial Stability Report, Thompson Through MS Research: ‘Banks deleveraging and Real Estate’, March 2012
Average loan tenor 5 years Extensions to optimise recovery Euro-zone crisis drives longer shrinkage period LTRO relieves stress near term 21
Funding
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Funding from a clients’ perspective -
+
Size & complexity
Towards Investment Grade
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Funding from a clients’ perspective cont’d Gross margins in sector at historic high Average interest rate margins for different RE loan sectors
….steady upward trend for REF as result Margin on new production in ING Lending Services
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Basel III: Focus on funding side of the BS Simplified example Balance Sheet
Assets
Liabilities
i.e. Deposits, Savings Accounts, Current Accounts, Treasury Products.
Funding GAP
•
The crisis learned funding in (liquid) capital markets & interbank market can easily dry out (funding gap).
•
Funding gap in the ING NV Balance Sheet is even more stretched
Basel III provides constraints to further close the funding gap and continue our business. We need to capture “stable” and long term funding (see next slide).
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Funding from banks’ perspective Liabilities
Simplified example Balance Sheet
Assets
buffer to protect deposit holders
A minimum Core Tier 1 (CT1, equity and retained profits) is required
to absorb unexpected losses in the commercial loan portfolio and not impact the deposit holders
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Vastgoedfinancieringstrends
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Vastgoedfinanciers moeten juist nu anticyclisch financieren.
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On-going decrease in property appetite A self-fulfilling prophecy? Lower asset valuations
Crisis
Limited liquidity in Financial Markets
Value decline 29
Traditional way of banking is history Before • Focus mainly on asset growth. Funding was available and cheap • Balance Sheets (BS) largely increased • Dependence on short term funding on capital markets and the interbank market
Now • The crisis showed liquidity does have a price and Banks shouldn’t take the risk to depend too largely on capital markets and the interbank market • Real estate has a bad and high risk image
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Debt European CRE Debt & CMBS maturity profile (€/billion) Source: CB Richard Ellis, De Montfort University, Standard & Poor’s, Fitch
Difficult to refinance in the current market
No refinancing on short term required
Short-term Debt Poor Quality Properties, High LTVs
Long-term Debt (2016 + maturity)
20% Opportunity alternative debt Short-term Debt Good Quality Property High LTVs
23%
24%
33%
Source: CB Richard
• • • •
Easy to refinance
Short-term Debt Good Quality Property Low LTVs Ellis
Total financed CRE by the largest European banks>€1.2 trillion (5.2% of total assets) UK and German banks have largest CRE exposure with respectively €317bn and €255bn The wall of debt peaks 2012-2013 with €350 billion of expirations Large opportunity for alternative debt providers that are aiming for higher returns 31
Leverage effect Example •
Rental income = EUR5m
•
Cost of debt = 5%
•
Holding period = 5 years
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Annual value increase = 1%
•
Equity IRR requirement fixed at 10%
All depends on LTV available in debt markets !
How much can investor pay for rental stream? Input LTV IRR
80% 10%
Calculation Year 0 Rental income Interest Sales value Loan repayment CF to equity (20) IRR 10%
1 5 (4)
1
2 5 (4)
1
3 5 (4)
1
4 5 (4)
5 5 (4) 105 (80) 1 26
Loan Equity Purchase price
Output 80 20 100
80% 60% LTV 40% 20% 0%
Sensitivity IRR 10% 100 83 72 63 56
(44%)
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Alternative financiers Looking at “European Real Estate Debt”
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Future of property lending High quality Loan book
• No more secondary property • Lower leverage Avoid losses
• Liquid paper
+
+
Sustainable attitude
Culture
• Compete on service (vs risk) • Staff- & shareholders aligned
Healthy margin
• Syndicate responsibly
= Profit
=
Consistent contribution • No P&L volatility • Costs under control
Future
• Protected reputation 34
TMB PZ 10-2013
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Cases Vastgoed, Agenda 1. KPI’s perspectief Financier 2. KPI’s perspectief Vastgoedadviseur 3. Cases 1. Office 2. Retail 3. Residential
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Perspectief Financier • • • •
Betaalbaarheid Debiteur (asset management) Wederverhuur Loan-to-Value
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Perspectief Vastgoedadviseur 1. Gebied 2. Gebouw 3. Gebruiker
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Case 1 – Office, Stationsstraat 15 te Amersfoort • • • • • • • • • •
• ING beoordeelt financierbaarheid • DTZ adviseert de koper •
•
8.000 m2 v.v.o. Bouwjaar 1992 Parkeernorm 1:100 16 huurders (bonte mix) Rest. Looptijd 3,1 jaar Leegstand 15% Koper is vermogend Core business: ICT Nieuwe toetreder Doel: deel v/h vermogen beleggen in vastgoed Motief: risico spreiding LTV : 60% • BAR v.o.n.: 8,5% •
• •
• •
•
Object is marktconform verhuurd Stationslocatie Marktconform onderhouden Gebruik conform bestemming Geen kadastrale waardebeperkende factoren Eigen grond
Spread (10-jr staatslening) : 2,20% Factor k.k. : 11,0 39
Case 2 – Retail Wijkwinkelcentrum te Apeldoorn • • • • • • • •
• ING beoordeelt financierbaarheid • DTZ adviseert de koper •
1.000 m2 supermarkt 3 x 250 m2 dagwinkels 1 x 250 m2 leeg Supermarkt huurt nog 1,5 jaar Rest. Looptijd dagwinkels 4,5 jaar Koper is ervaren partij Koopt aan in B.V. Vennootschap heeft financiële buffer en solvabiliteit van 45% In privé is vermogen aanwezig LTV : 65% • BAR v.o.n.: 6,75% •
• • • • • • •
Marktconform verhuurd Kadastraal gesplitst Voldoende openbare parkeerplaatsen Supermarkt wil min. 1.250 m2 Gebruik conform bestemming Geen kadastrale waardebeperkende factoren Geen erfpacht
Spread (10-jr staatslening) : 2,00% Factor k.k. : 14,0 40
Case 3 –Residential Wijk: Malburgen te Arnhem • • • •
• • • • • ING beoordeelt financierbaarheid • DTZ adviseert de koper •
Verkoper is een particuliere belegger Koper wil doorexploiteren Woningen zijn kadastraal gesplitst Goede voorzieningen in de wijk 150 grondgebonden arbeiderswoningen Bouwjaar 1956 90 m2 g.b.o. per vhe Perceelgrootte 150 m2 Huurprijs EUR 5.250 per jaar = max. redelijk LTV : 60% BAR v.o.n.: 6,0%
• •
• •
• • • • • •
•
Goed onderhouden Leegwaarde per woning EUR 150.000 Contracten voor onbepaalde tijd Opzegtermijn 1 maand Homogeen complex Niet geliberaliseerd Gebruik conform bestemming Geen kadastrale waardebeperkende factoren Eigen grond
Spread (10-jr staatslening) : 1,85% Factor k.k. : 16,0 41
