This scenario consequently led to a deceleration in the volume of new credit granted to the sector in Iberia in 2020. Nonetheless, logistics and residential rental appear to have a fast track in the Dutch bank…
In the final stretch of one of the most challenging years ever for society and the economy, Julian Bravo, Head of Real Estate Finance Spain & Portugal at ING, spoke to Iberian Property and gave his assessment of the performance in 2020, and the implications brought by the pandemic.
In one of the most challenging years ever for the Iberian economy, due to the effects of the pandemic, what is your view of ING Real Estate’s activities in 2020 in Spain and Portugal?
This year has been atypical and, inevitably, the pandemic has generated a climate of uncertainty that has had an unpredictable impact. Even so, during this year we have put a great deal of effort into actively managing our portfolio to help our customers, and to avoid slowing down new operations.
ING Real Estate has been established in the Iberian market for a long time, and this is not the first time it faces a severe crisis. How do you see your activity evolving in this pandemic context?
We have a consolidated position in Spain and Portugal. We have been financing real estate assets for 20 years and have been extremely active in the last few years. During all this time, we have faced numerous challenges, which has given us the experience to be able to develop our business in adverse circumstances. Therefore, our activity will continue to evolve: on the one side, we are more restrictive in financing some assets and, on the other, we are focused on sectors that are less impacted by the pandemic, such as residential rental and logistics, a sector where ING has been very active in the Iberian market since 2014.
And what are the key strategic goals in Iberia for the upcoming months and 2021?
Our goal is to proceed as we have done until now or, as we say, to maintain ‘business as usual’, combining two key principles: active portfolio management that helps our clients and continue to look for financing opportunities despite the current context.
Regarding the credit granted to real estate operations in Iberia, what was the total amount financed by ING in Iberia over the last couple of years? And in 2020 alone? Would you like to highlight some of these operations?
We have been very active in the last few years, with a total gross financing volume between 500 million and 1 billion euros per year. We expect to close this year with 5 deals involving almost 300 million euros in new production, which is a great success considering the unprecedented pandemic scenario. One of the most important deals we financed was the ING MAD building operation, where ING granted the financing for a South Korean fund to execute its purchase.
With the pandemic, what has changed in ING’s lending strategy for real estate in Iberia? Considering the current scenario, are there any blacklisted asset classes?
This year, due to uncertainty, we have been more cautious with the selection criteria of certain asset typologies such as the retail sector, which has been more directly affected by the pandemic than others. Nowadays we focus primarily on residential rental and logistics.
At this stage, how do you see the opportunities Iberia currently offers to foreign investors? And, specifically in Spain, in your opinion, where are the best real estate investment opportunities today?
For opportunistic investors, we do not see great opportunities or significant price adjustments in the market, considering the temporary nature of the pandemic and the low indebtedness compared with the previous global financial crisis. The market believes pre-COVID levels will soon return.
On the other hand, the Iberian market remains attractive for core and core + investors, and there are good opportunities in commercial real estate with a well-balanced risk-return for different types of assets.
Both the Spanish and Portuguese governments have established credit support programs and a moratorium regime to mitigate the negative effects of COVID-19 on economic activity. But what will happen once the moratorium regime ends in 2021? Do you foresee significant growth in NPL and REO?
No, because of the temporary effect of the pandemic and low customer leverage. Compared to the financial crisis ten years ago, the debt situation is lower and we expect everything will return to normal by 2021. Therefore, we do not anticipate a massive outflow of NPLs and REOs to the market.
Last but not least, what do you think will be the major changes in Iberia’s real estate investment environment after the COVID-19 crisis?
This is a temporary situation; therefore, we do not expect major changes. We predict the current environment of negative rates will persist in the long term, and real estate investment will remain as attractive for investors as it has been in recent years.