In fact, according to information provided by real estate consultants which analyses finance conditions in Spain, national entities are in the great majority choosing to finance projects of between 15 and 50 million euros, with a maximum loan oscillating between 50% and 60% of the asset value with differentials of between 160 and 250 basic points. However, when a project is of great interest to the banks, they compete amongst themselves and on occasion offer lower margins than those indicated..
With respect to previous years, conditions have remained stable, it being understood that from the beginning of the year some banks have started a tendency to increase margins in Spain in order to finance tertiary real estate, an increase of around 25 basic points over last year.
“Broadly speaking, it is given that the banks have learned the lessons of the crisis and are both more selective and conservative when it comes to the financing of projects, and, additionally, are much more regulated. Financing criteria at present are to finance operations which will guarantee loan repayment with net rental income which renders a profit for the building, in good urban developments, and with sponsors who have appropriate experience”, explains Jorge Valenzuela, Director of Financial Consulting at JLL.
Interest in new types of assets
Whilst the classes of assets that the bank prefers to finance include offices, shopping centres, business hotels in big cities and logistics assets, there is also increased interest in other classes of assets such as tourist hotels on the coast and student residences.
However, according to a source from JLL, before the enduring skills of the entities to finance the best projects in the best urban developments, there can also be observed an increase in the financing of projects of reform, repositioning and change of use, as there is also interest in the financing of projects for the promotion of new developments, but in all these latter cases the requisite is that there must be a legal permit for the work and that the properties must be pre-leased or pre-sold at a high percentage, such that the payment of the debt is guaranteed.
Although the Spanish bank is the most active in financing real estate projects, we are informed that there has been an increase in the role of international lenders, especially in projects between 50 and 100 million euros, or large, very ‘Prime’ real estate operations. Concretely, JLL has identified more than 60 lending institutions keen to invest in Spain, among which may be found the majority of Spanish banks, the International Ban, Insurers, and numerous Loan Funds which are entering the country.
In likewise manner, it can be observed that some international investment banks are the only ones which are financing the purchase of unpaid portfolios or those assigned from the banks, in such a way that a financing but active role can be seen on the part of the insurers.
Photo: The Telegraph