mezzanine and more - corestate capital · mezzanine financing - definition 6 mezzanine capital has...

Mezzanine and MoreTim Schymik, COO HFS

CMD - 12 September 2019

Who we are and What we do

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Key Figures Services Management

Founded2009

HeadquartersWollerau, Switzerland

Total Fund Volume1,2 bn €

AuM7 bn €

Mezzanine Financing− Offers funds to close the

financing gap

− Funds focus on German-speaking countries

− Since 2018 also Spain and

Portugal− Investment focus: Financing of

residential and commercial

properties

Fund Advisory− Structuring and support of fund

vehicles

Tim SchymikChief Operating Officer

Capital Markets Day, 12 September 2019

HFS - Stratos Funds Family

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STRATOS STRATOS STRATOS

German special fund

Launch: 05/2018

no term limit

Focus on Spain & Portugal

Fund volume € 25 million

German special fund

Launch: 09/2015

no term limit

Focus on residential real estate

DACH Region

Fund volume approx. € 200 million

German special fund

Launch 03/2014

no term limit

Focus on existing residential and commercial properties

DACH Region

Fund volume approx. € 1 billion

Immobilienanleihenfonds II Immobilienanleihenfonds IV


Real Estate Debt – Highly Diversified with Focus on Favourable Locations

Regional Break Down of Current Outstanding Financings (in m€)

Profile of HFS Mezzanine Funds end of H1-2019

155 145 118 98 97 9245 36 26 25 18

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135

> 65% of lending volume goes to Top7 Cities in Germany

Total committed fund volume: c € 1,25bn

Predominantly German residential

# of financed projects: 57

Ø size of mezzanine financing: c € 22m

Ø interest rate: c 19,5%

Residential73%

Retail17%

Office 10%


Mezzanine – Closing the Financial Gap

Mezzanine Financing - Definition

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Mezzanine capital has its origin in corporate financing

Mezzanine capital is also referred to as "hybrid capital“ because it is located between "real" equity capital and debt capital

Mezzanine Capital is freely negotiable and allows the greatest possible flexibility

Mezzanine capital as equity capital enables easier financing for banks due to classification as equity capital


Current Market Situation for Mezzanine

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Real Estate Property Market

Real estate prices have been rising for the last 10 years

Regulatory provisions cause banks to tighten their underwriting criteria and limit

their lending business

Equity capital contribution for the real estate investor has since increased

substantially

More negative effects from future regulation (Basel IV) will further aggravate the

situation



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Providers

Over 50% of liquidity is still provided by funds today

The second largest area (group of providers) are insurance companies and/or pension funds

Slightly fewer providers active in the market with around 136 market participants

54%Funds

19%Family Offices 13%

FinancialInstitutions

14%Institutional

Investors

Institutional investors include insurance companies, pension funds and retirement systems. Financial institutions consist of crowdfunding platforms and and investment companies.Quelle: FAP


54%Funds


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Perspective Market liquidity and investment pressure are still high due to consistently low interest rates

We remain optimistic for the next twelve to eighteen months expecting an increase in new business

Business remaining stable

Demand for Mezzanine from developers is still high

Forecast for the next 12-18 months:

5%

slightly decliningdevelopment

4%

36%

22%

constant

36%

42%

positivedevelopment

23%

32%

higher demand


Competitive Advantages

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I. Competitive Advantages Market Leader

10 years of experience

Funds based on liquidity management

Target Markets Germany, Austria, Switzerland, Spain and Portugal

II. Lenders’ Perspectiv With a single financing partner the effort is lower

Advantages through fast and reliable financing

HFS can assess risk and opportunitie

III. Investors’ View Diversification through clear fund structure

Access to an attractive risk-return profile

No need to set up your own department – Track Record HFS/genost successful for 10 years


The future of the Mezzanine Market – an Outlook

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provision may not be subject to the increasing requirements of Basel III/IVCapital .

Less dependence on banks for investors

Various forms can be structured: preferred equity, joint venture, mezzanine capital, junior loan, subordinated loan or subordinated bond, etc.

Individual conditions

For investors: higher earnings prospects (risk/return profiles)


HFS News

Whole Loan Financing

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Advantages of comprehensive financing of Senior and Mezzanine

Advantage of speed (banks 3-4 months, HFS 4-6 weeks)

Advantage of real estate projection (genost estimates the realistic development potential)

Advantage of simple and clear structures (one-stop shop: no negotiations with several parties)

Whole Loan

Equity 10-20%

Junior(subordinate)

+Senior

(priority)

80-90%

100%

High Demand from BorrowersDue to incoming financing inquiries as wellas the ongoing exchange with borrowers, ahigh demand for a comprehensive solutionwas recognized.

Standards and Processes Capital is provided on the basis of the provenbond model recognized by marketparticipants. Processes and documents areset up quickly and goal-oriented.

Investor DemandThe continuing low interest rate environmentin Europe is boosting investor demand forsenior secured investment products withattractive yields.


Sample Transaction

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Total Investment Cost approx. 260 Mio. €

16%

42%

42% Senior Bank (110) *2,5%

Mezzanine (110) *12%

25%

75%

Equity (65)*20%

Total Ø 9,2%

Equity (40) *20%

HFS Senior (195) *4,5%

Total Ø 8,3%

Current Target


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Many thanks for your attention!

Any further questions?


mezzanine and more - corestate capital · mezzanine financing - definition 6 mezzanine capital has...

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