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In an interview with Sebastian Dahlhaus from finpair, Roman Becker, managing director of Wohnbau Mainz GmbH, talks about private placements for municipal housing.
This measure involved refinancing in the area of corporate financing. Our focus remains on mortgage-backed property financing, but we are happy to add unsecured Schuldschein loans and registered bonds to our financing structure as needed. We have now deliberately opted for a transaction via a registered bond and thus added an additional long-term element to our loan portfolio with a term of 15 years and a moderate repayment structure.
We did not want to make use of existing facilities as part of our creditor pool, but to explicitly attract new creditors in the form of investors through cooperation with finpair. It was important for us to address an exclusive group. We received offers from investors in a very simple and uncomplicated way via the finpair platform. We reached out to savings banks, state banks, commercial banks, but also pension funds and insurance companies with our request via finpair. Contacting us via the digital platform is like a call for tenders and we chose the most appealing offer from the interested parties. This gives us the most economically attractive financing on the market with the least effort for our company. The implementation via private placement therefore fully met our requirements.
Oh yes, the difference is significant. Easier and faster implementation based on existing documentation and company presentation! By using the FinPair platform, we were able to attract a smaller, specific group of investors in a targeted and efficient manner. To address the private placement, we contacted a selected group of potential investors that finpair had recommended to us. Quite deliberately not the entire market, as the issue volume of EUR 15 million was simply too small for the overall market approach. In addition to our credit rating documents, we submitted a fact sheet - a much smaller format of an issuer portrait - which we received from Finpair's cooperation partner DAN/AG (Deutsches Analyse Netzwerk AG from Göttingen). There was no need for an investor conference call and the implementation of the transaction was based on the credit process of banks and insurance companies — there was therefore a more flexible timetable.
Basically no. As described above, we wanted to use the corporate finance character and not secure it at property level. So you have to look at this a bit more deeply. At first glance, the spread (i.e. the credit margin) is more than the level of a secured loan. However, when it comes to Schuldschein loans and registered bonds, we are talking about unsecured financing. This means that we conserve our free assets, which are then available to us as collateral for other financing. We also save expenses for ordering and managing collateral. In our opinion, these aspects make up for the moderate mark-up very clearly.
This is difficult to estimate. Falling loan values due to increasing environmental, social and governance (ESG) requirements as well as persistently high interest rates and economic development will make existing (re) financing more demanding from now on. Traditional investments in residential construction will be difficult to represent on the private investor market, as there are clear restrictions on the use of subsidies in the housing industry. By providing funding to professional players in corporate finance, on the other hand, existing leeway could be used — provided that the credit rating is appropriate! As soon as we all get used to the new world of interest rates, real estate companies will certainly return to the market with larger transactions. The Schuldschein loan market is and remains an interesting source of capital.
What do your investors want?
That is a good point. Investors are looking for credits — especially in uncertain times — that are as independent of the economic cycle as possible and perform less cyclically. The real estate sector in the Schuldschein loan market certainly needs to be examined delicately. At the moment, “distressed loans” from the commercial real estate sector are having a burdensome effect on the market. On the other hand, we see the residential real estate sector as positive and very reliable. If the good credit rating of a municipality is also effective as a shareholder, in our opinion, all the wishes of an investor with an affinity for real estate are met.
Thank you for the interesting dialogue, Mr. Becker. We look forward to upcoming transactions in your sector and are always happy to exchange ideas. All the best and see you soon.
