How investments in development projects become a success for debt funds.
They are flexible and, according to an FSB report, now account for almost half of the market worldwide: private credit providers. Debt funds have been booming in Germany for several years now. When banks withdraw from the lending business, the agile capital providers fill the gap. And in the meantime they have become an integral part of the financing market. Not only for financing existing properties, but also for development projects.
The latter, however, mean an increased risk for these funds - because two questions arise here: Will the future property be fully utilised and is the construction going according to plan? Two factors that do not exist in the same way for an existing building. The right location and asset class - currently care real estate portfolios or residential properties, for example - ensure future lettability and yields. A good analysis of the market and property type is therefore essential for this calculation in advance. And in order to achieve smart management of development financing risk during construction, solid construction monitoring is crucial - especially with regard to costs and deadlines. If completion is delayed, costs skyrocket and can jeopardise the financing. If you are close to the development and keep an overview, you can counteract this right from the outset.
We talked to Martin Kleemann, managing partner of KKM Wirtschaftsprüfungsgesellschaft, and Dr Achim Johannis, managing director of assetecture GmbH & Co. KG, about construction and project loan monitoring. They also discussed the regulations that are so important for financiers. Which regulations do debt funds have to pay attention to when investing? How do you remain flexible and time-efficient despite these regulations? And why is the investment environment currently so favourable for private lenders? An interview: