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Report

Property financing markets outlook - Q1 2013


- Funding sources are diversified over the last year with new players in the debt market
- Available for funding liquidity are up early in the year
- The terms of the mortgage are softened somewhat since the beginning of the year (margins, conditions, lending)
- To the extent the market is very fragmented and difficult to read by the borrowers.​

In 2012, the market tried to overcome the deficit of mortgage financing.
2012 marked a turning point in terms of real estate financing; the European market, highly dependent on mortgage debt, tried to find new sources of funding from new players.

We first note a dramatic increase in bond issues from the French listed real estate companies who have decreased their use of mortgage financing. Last year there were fifteen bond issues in France whose volume varied from €50 million to €750 million, for a total exceeding €5.5 billion (more than double 2011's figure). The success of these issues, made through private placements (and often heavily over-subscribed for the largest issuers), can be explained by the corporate signature based on significant property portfolios but also by a growing appetite of the market in search of diversification.
At the same time, many players have engaged in "shadow banking", i.e. they position themselves as direct lenders: e.g. Axa, Aviva, Allianz, taking advantage of regulatory changes favourable to this type of diversification (Solvency II), or by structuring debt funds.

Among the companies active in this segment we note La Française AM, AEW Europe, Acofi, and La Banque Postale AM. These new financing players are also positioning themselves both on primary syndication from banks and on new senior financing. However, the diversification of players in the financing market does not solve the problem of financing risky assets (e.g. development), with most of these players staying focused on secure assets.
Thus, at the end of last year, if core financing needs were largely met by both traditional and by new players, that of development projects and non-prime assets still remained difficult.

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