Financing a real estate portfolio

Real estate investors buy or put together real estate portfolios in order to spread their risk. Due to its component parts, the associated financing of the portfolio (portfolio and cash flow analysis, credit structuring, securities concept and contract structuring) is elaborate and complex.

Direct real estate investments

The same key criteria are used: cash flow, proportion of own resources, reporting, controlling etc. Once again the bank and investor / debtor agree on the real estate and balance sheet related covenants. – It is recommended to define the proportions by which the overall loan will be distributed across the individual items of real estate. This is advantageous in the case of the sale of real estate, portfolio regrouping and similar circumstances. In the absence of the internal distribution of the loan amounts, questions on the preservation of portfolio quality would inevitably arise following a change to the portfolio. This is often the origin of declarations of default and legal disputes. Account should also be taken of the “domino effect” (one item with poor performance in a good portfolio).

Indirect real estate investments

If the portfolio is made up of share stock in individual real estate companies

  • The loans are managed as Lombard credits
  • The shares are pledged
  • Financial management and reporting are determined by way of balance sheet and accounting regulations, which mean less regulation effort due to the automatic use of existing standards (IFRS, GAAP etc.).
Print / Share: