Frankfurt, 20th July 2022
- Successful transactions and investments with a total volume of around EUR 56 million in the first half of the year
- Focus on top European locations in the residential and office sectors
- Focus on core and core+ properties with conservative financing structures
- Further high-quality projects in the pipeline for the second half of the year
Prime Capital, the independent asset manager and financial services provider based in Frankfurt, looks back on its Real Estate financing transactions in the first half of the current year and is planning further investments and new projects for the second half.
Following a significant number of high-quality Real Estate financings in recent years, the company successfully arranged further transactions in the first half of this year and expanded its investment activities with a volume of around EUR 56 million in existing properties and project developments. The focus was on new business with established sponsor addresses in top locations throughout Europe, both in the residential and office sector.
For new business, the financing structures were adjusted to the current environment, mainly through lower LTVs, a more restrictive deal selection and a focus on established locations with positive (re-)letting forecasts. The demand for sponsor quality as well as the location and letting of assets have also increased considerably in this context; as a result, the portfolio quality has improved further.
Asset quality, in general, has continued to improve in the current market environment, partly due to the accelerating withdrawal of banks from financing markets. In the context of rising interest rates banks have to increase their risk provisions, which leads to an increase in RWAs. This limits the scope for new business. The increased requirements of banks for credit risk ratios are leading to a focus on Real Estate financing with long-term leases or low LTVs – this still creates a lot of competition between banks in this area. For assets that deviate from the target profile, banks have limited willingness for refinancings – this offers considerable financing opportunities for providers of alternative financing solutions; previously “bankable assets” are now more frequently requested for alternative financing structures at higher yields.
Even with the onset of significantly more volatile markets since March 2022, Prime Capital has extended financings that are characterised in particular by high sponsor credit ratings, above-average location quality and stable cash flows. In the case of individual financings, there is also still potential for value appreciation through development reserves on the property as well as proven potential for rent increases.
In Prime Capital’s existing portfolios, there is a small number of late repayments due to individual challenges in the area of project developments, in particular due to delays in sales processes where sellers want to take advantage of the current uncertainty in the markets to renegotiate on the purchase prices. The quality of the sponsors and the partly already existing cash flows secure the servicing of the loan interest. These limited maturity extensions tend to lead to an improvement in IRR, including through interest rate step-ups and extension fees.
Prime Capital expects the market environment to continue to be challenging in the coming months, inter alia the sharp rise in interest rates as well as construction and labour cost inflation; however, at the same time, the focus on core and core+ assets with adequate financing structures offers a variety of new investment opportunities.
“We are pleased with our successful Real Estate Debt financings to date and are preparing our next projects for the second half of the year. Not least due to the recent developments in the Real Estate market new opportunities with adjusted risk-return structures arise for our investors and us,” says Guido Gerstner, Head of Real Estate Debt at Prime Capital.
“For the second half of 2022, we are planning further investments as well as new strategies to combine the advantages of higher interest rates and short maturities in the Real Estate Debt segment – which is of regulatory interest due to low solvency capital requirements. Thanks to our many years of experience and our diversified team, we can take advantage of the opportunities offered by the current market situation,” adds Stefan Futschik, Head of Private Debt at Prime Capital.
About Prime Capital:
Prime Capital AG is an independent asset management firm and financial services provider, owned by management and employees. The company specializes in Alternative Investments, in particular in Absolute Return, Infrastructure, including Renewable Energy and Private Debt. Furthermore, the company offers Access Solutions as well as Investment Advisory & Solutions. Prime Capital was founded in 2006, currently employs around 120 people in Frankfurt and Luxembourg and is regulated by BaFin and CSSF.
As of March 2022, Prime Capital has approximately EUR 4.3 bn Assets under Management as well as EUR 7.3 bn Assets under Administration.
For additional information, quotes or requests please contact:
Prime Capital AG
Andreas Kalusche, CEO
Questions regarding the content please contact Guido Gerstner
Tel: 0049 69 9686 984 265