At an event initiated by FAP Invest GmbH in Seoul, more than 40 South Korean and other Asian investors showed an interest in increasing their allocation in Europe’s ‘alternative’ real estate market, with real estate debt, is at the forefront. South Korean investors prefer mezzanine loans because of the return on investment, according to FAP’s recent findings.
Hanno Kowalski, Managing Director of FAP Invest GmbH explains:
“Asian investors, especially Korean investors, are increasingly looking for real estate debt investments. With our event, we not only provided investors with abstract information about the market, but, using case studies and live investment possibilities, also showed them concrete investment opportunities. Investments in Europe are supported by a positive currency hedge (won to euro). This allows investors to leverage the return on investment again. Within Europe, Germany plays the most important role as a ‘safe haven’. The interest is very high.”
According to FAP findings, Asian investors provide large-volume capital for investments in real estate debt, usually from €30 million per deal, whereby €200 million per deal and more have also been invested. According to FAP research, the interest rate expectations are in the mid-single digit range, also for developments.
Hanno Kowalski added:
“Investors from Asia have recently experienced problems with development mezzanines abroad. Thus, investors are currently – i.e. temporarily and not fundamentally – focusing more on mezzanine for portfolio financing with a current cash flow when making a selection.”
In October, a survey by FAP showed that office and residential mezzanine financing remain top of the popularity sector rankings among German lenders in 2019. Student housing and co-living also increased in popularity, while hotels and boarding houses drop slightly. Losses were also recorded in retail, shopping centres and the logistics sector. The office and residential sectors are also considered safe havens when it comes to financing project developments.
FAP’s mezzanine survey – consisted of 53 of the current 146 investors active lenders –depicted an agile, flexible and stable market for subordinated financing in Germany.