Financial institutions eager to lend for real estate projects

Financial institutions are increasing the availability of real estate financing while the share of alternative lenders is growing. Retail real estate is the most favored sector for financing and German banks remain the strongest players but Polish financial institutions have entered the race as well, according to a report by JLL on real estate financing in Poland. The company interviewed 20 key market players, including banks and other financial institutions. The interviewees were asked about the level of interest in financing projects in Poland, the criteria for consideration, types of real estate that have the best chance of obtaining debt as well as alternative financing options and their achievable terms. The survey shows that there is strong interest from financial institutions in financing the Polish real estate sector: 74 percent of the people interviewed said that their organization has a high or very high lending appetite. 71 percent of participants offer debt financing, while 29 percent are willing and ready to finance other parts of the capital stack (including mezzanine, financial or operating leases). 69 percent offer both investment and development loans. Despite the attractive terms and decreasing costs of financing, lenders continue to be cautious and the majority of them require a full security package (standard guarantees, full hedging, soft and hard covenants). “Research shows that among all sectors of the commercial real estate market, retail projects were the most preferred asset class for development financing. What is more, the lenders are open to the financing of both prime and prime – value added products in this sector. Furthermore, office projects and industrial projects, are enjoying interest as well. Opportunistic assets, especially from the office and retail sectors, are mainly on the radar of alternative lenders, who are keen to take on more risk in return for higher profits," said Anna Grzędzińska, Consultant, Corporate Finance CEE at JLL.