Halt to rate rises is the signal needed for deals to flow again

The market will start moving again once it is perceived that interest rates are at their peak, Aareal’s chief market officer and board member Christof Winkelmann explained.

He emphasised that this will not be when rates start to decrease again, merely when they stop rising. “That’s when you can set a price point and, hopefully, sellers and buyers will find the price that they both can agree upon,” he said in an interview with Real Asset Insight.

Nor is it a case of where the rate stops rising. “Of course, that has an influence on certain things but it is that it stops going up,” he added. “That will liberate the market and get transactions flowing again.”

Asked about the integration of ESG into Aareal’s business, Winkelman pointed out that ESG is a process and that everything is not changed overnight.

“As a bank we can help that process. It would however be foolish to assume that tomorrow morning we only have green assets on balance sheets and are ESG friendly and we’re all good.”

In any given town the percentage of green buildings might be between 10 and 25%. “So it would be foolish to assume that as a bank I can only finance green buildings.” He pointed out that the logical conclusion of this is that the only buildings left to finance by other banks would be “brown”.

“It’s a process where we want to, and are, supporting our borrowers in the transformation.”

However, he pointed out that some buildings are not capable of transformation but green financing puts certain ongoing conditions and requirements on borrowers during the tenure of the loan to them.

“So it’s not, day one it’s green, and then afterwards we don’t care. It is something you have to maintain, there are grading levels, there are certain duties you have to fulfil throughout the term of the loan and that is beneficial to our borrowers as it is to us and everything around us.”

Please click on the video above to watch the full interview or listen to the podcast below.