Credit provisions for the asset class rose to a peak for data going back to 2022, almost doubling from a year earlier, according to an investor presentation published Thursday. While Deutsche Bank is “seeing some stabilization” in the broader US commercial real estate market, the office part of that will likely “continue to be impacted” for the rest of the year, Chief Financial Officer James von Moltke said on a call with fixed-income investors on the same day.

The remarks highlight how Deutsche Bank’s unique position as one of the biggest European lenders to developers of US commercial real estate — and offices in particular — will continue to be a sore point for investors. Even though its US CRE exposure accounts for only about 3% of its total loan book, it was the source for more than a quarter of the bank’s credit provisions in the last three-months period.

The average loan-to-value in its US office loan segment remained at 81% as of end-June, the bank said. That compares with an average CRE portfolio LTV between 50% and 60% at large German banks last year, according to a report from Fitch Ratings.

A previously expected recovery in the asset class hasn’t yet materialized, Deutsche Bank said during its earnings presentation on Wednesday, causing it to give a worsened outlook for full-year credit provisions. Shares tanked as much as 9%.

Elsewhere, New York Community Bancorp’s stock fell as much as 17% after reporting provisions for loan losses that were higher than every analyst’s estimate. That was linked to increasing charge-offs, primarily office loans, it said.

The commercial property market has been hard hit by interest rate rises, which have raised borrowing costs. US offices are among the worst performers as they have also experienced rising vacancies on the back of higher rates of remote working.

Source: Yahoo

The post Deutsche Bank’s US Commercial Property Loans Are a Growing Drag on Its Profits appeared first on Amora Escapes.

Real estate stocks were the top performers in Europe on Thursday morning as immediate concerns over prospects for the highly leveraged sector eased after a heavy drop in March that dragged it close to 10-year lows hit last year.

Investors though remained wary of more pain ahead for the industry with property prices looking set to fall further as the economy weakens, while tighter credit conditions make it harder for some companies to refinance debt.

“At these levels, a bit of bad news is in the prices. Nevertheless, I believe prospects for real estate remain ugly,” said Giuseppe Sersale, fund manager at Anthilia in Milan. “I remain in the camp of those seeing a recession coming.”

Sweden’s Castellum , SBB, Wallenstam , Aroundtown and Vonovia in Germany and Dutch-listed Unibail-Rodamco led real estate stock gainers, up more than 4%.

Some of these companies are highly shorted by investors seeking to make gains from a fall in their share prices.

The STOXX Europe Real Estate index was up 2.8% by 0843 GMT, leading sectoral gainers in the region, although it was still down more than 13 % so far in March. The broader STOXX 600 equity benchmark index was up 0.9% on the day.

Citi warned this week the potential downside for real estate stocks in Europe could exceed 50%, should the market test 2009 trough price-to-earnings valuations. Analyst also see bigger risks that real estate companies in continental Europe may have to tap shareholders to beef up their finances.

Source: Zawya

The post European Real Estate Stocks Bounce at End of Troubled Month appeared first on Amora Escapes.

A significant investor risk for landlords is when tenants don’t pay. This is because the system depends on tenants paying rent in full and on time.

Serious problems can arise for all when tenants cannot pay.

France and Italy have laws that are significantly favourable to the tenant.

France has rules that can prevent the eviction of non-paying tenants from residential properties during the winter months.

On the other hand, the UK and Monaco have more balanced rules allowing an easier resolution to this situation.

A country with laws balanced between landlords and tenants will attract more investment into real estate, and this is what every country should be trying to achieve.

Most prudent investors buy existing income-producing buildings. In my opinion, property development is the riskiest part of any real estate investment.

And if you are developing away from your own country, the risk is even higher, and you will need the right local team.

It can be the most rewarding of any property sector, but the timing has to be right.

High-interest rates, recession, war, change of government, or well-known international banks like Lehman Brothers or now Credit Suisse going bust, can easily create problems and change the mood for everyone.

This is why you need to mitigate your risk as best as you can by having other sources of income.

I feel for those starting out with no help because I know what it is like; I could not mitigate my risk when I first started.

I had to take many calculated risks with my developments to create a solid, stable income.

Now, I can be the best buyer of real estate in the world as I can move very quickly if it is the right deal.

And, if I get a fantastic price to sell a building, I will sell.

However, I am the worst property seller because I become miserable and depressed, and most people know to stay away from me.

But I do feel better after the profit has been reinvested again in more real estate.

It does not matter about the size of your company.

Once you create trust with the banks, and they know you are serious and perform regardless of the risks, they will be there to support you.

After all, the banks are there to make money!

When you have the full support of your bankers, the only good problem you have is finding the right deals.

Rule number one; don’t let your banks down.

Rule number two, don’t forget Rule number one. Don’t let your banks down!

When dealing with banks, negotiate as best as you can and always stick to the agreement.

They are a key to your success.

Planning rules

Good planning rules – and following those rules – is good for everyone; the quality and safety of structures improve, and this benefits both the construction sector and the wider economy.

The construction industry is the largest industrial employer in Europe, employing almost 7% of the workforce, over 4 million people and with an annual turnover of almost €1.7 trillion.

Source: Financial Mirror

The post Investment Opportunities in European Real Estate appeared first on Amora Escapes.