Category Archives: finance

The cheap money era ending?

image-508200-galleryV9-ttntSpiegelOnline asks the big question of the day: Can the World Handle Higher Interest rates? It was always going to happen, of course. Part of the strategy of central bank’s around the world has been to cut interest rates to the bone in an effort to spark growth. It’s debatable what sort of impact this has had, but bond buying programs by the treasuries of the big nations are huge. Spiegel cites the Japanese example, in which 70% of demand for bonds is from the Bank of Japan.

It’s the topic of the moment because the American Federal Reserve has begun to hint that the days of easy money and huge bond buying programs could be numbered. And as you’ll have noticed, when the Fed makes hints, markets go haywire. It’s an interesting read, for starters, but you have to wonder what the long-term impact on real estate financing will be. Especially for existing loans. We’d welcome any thoughts on the issue you might have, anonymously or otherwise.

When the financial crisis escalated in 2008, the Fed, the European Central Bank and other central banks began their cash therapy. Almost in lockstep, they reduced prime rates to close to zero and began buying up bonds on a large scale. To this day, the leading central banks have inflated their balance sheets with such practices to $10 trillion (€7.5 trillion).

But now something is changing. “For the first time, it looks as though one country, namely the United States, is leaving the crisis behind,” says Ulrich Kater, chief economist at DekaBank. “And, also for the first time, a central bank, the Fed, is showing that it is thinking about normalization.” …

 

Hints of change?

Is the Basel effect finally kicking in?

After talking quite with a variety of people around the region, it certainly seems as if there’s a shift afoot. It’s become so fashionable to talk about banks doing The Ostrich over the past few years, that it would be easy to miss the signs of a changing market place.

In fact, whether it’s the Basel III effect, the cumulative effect of loans coming up for renewal or the realization that holding on to real estate assets eventually requires capital expenses, the big freeze seems to be thawing just a bit. There are lots of signs of this, whether you look at the appointment pages, the creation of new funds, the collection of equity for debt funds or the willingness of banks to call it a day with some sponsors.

It’s still but a fraction of what it was, and the geniuses in Brussels look no closer to making any hard decisions. But as we’ll be discussing in the September issue of CIJ, there does appear to be a greater willingness, at last, to start just getting on with it. If you disagree violently, make sure to let us know.

MIPIM topics

Interested to hear what people expect the topics of MIPIM to be. (hint, send emails) We suspect it’ll be mostly the same: where’s the money? One worrying comment we picked up recently was one banker saying most of his meetings down in Cannes would be in with other bankers. Seems like everyone’s looking for money.

CMBS in USA inching up

No doubt there’s still bad news around the corner, but it’s encouraging to see positive news as well. Not only is unemployment down to 2009 levels while the housing market is genuinely showing signs of bottoming out, but CMBS lending is creeping up. From WSJ:

Standard & Poor’s said the issuance of U.S. commercial mortgage-backed securities improved last year, though issuance fell below its expectations due to uncertainty and volatility resulting from the European debt crisis and other macroeconomic events.

Aggregate CMBS issuance for 2011 was $32.7 billion, below S&P’s forecast of $35 billion. S&P noted CMBS activity increased significantly early in the year, but the pace of issuance has since slowed.

For 2012, S&P again projected $35 billion in CMBS issuance. While global economic headwinds are expected to temper the near-term expansion of CMBS issuance, S&P credit analyst David Mollin said commercial real estate fundamentals have improved modestly in recent years and noted securitization will continue to play a significant role in the sector’s recovery.

Goodman (GELF) launches €400m rights issue, plus refinancing

The Goodman European Logistics Fund (GELF) has launched a €400m underwritten rights issue, while announcing an agreement on terms for a new €800m debt refinancing package.

Goodman Group CEO and Chairman of the GELF Investment Committee, Greg Goodman said, “These are significant capital management initiatives for the Fund which will further strengthen GELF’s balance sheet and ensure gearing is maintained below 40% in line with the Fund’s long term gearing target. The initiatives will also provide approximately €500 million of investment capability giving the Fund capacity to increase gross assets to €2 billion and improving financial flexibility.”

The refinancing includes €400m of secured facilities and another €400m unsecured facility, structured in a way that’s supposed to let GELF “transition” to debt capital markets over time in order to diversify its long-term funding sources.

Germany finds €55bn. Heads will roll.

Perhaps only in Germany would there be a scandal if it turned out the country was in less debt than it thought. Hypo Real Estate, now a state-run bad bank, messed up sums, or added something twice, and reported being €55bn further in the hole than it actually was. Spiegel is headlining the article “Germany’s dumbest bank.” The finance ministry was allegedly told of the mistake at the beginning of the month, but now that the press has picked up on it, the Minister Himself will be calling in the bank’s boss for a rollocking.

 

CTP scores new development loans

CTP has continue to expand its financing base by agreeing loan terms with VUB/Intesa for a €20m facility for the development of its newest venture, CTPark Mlada Boleslav. The industrial investor is hoping to take advantage of the growing importance the city has on the European auto manufacturing scene. The developer also concluded new loan agreements with CSOB (€12m) and with Volksbank Real Estate (€8m) for the construction of new projects for clients like ViskoTeepak, ABB, Raben/Wincanton and Kühne & Nagel.CTP now has 225,000 sqm of construction underway and has €194m in new financing secured.