Andrei Protasov: "The future of investment in commercial real estate - alternative financing"

Investment activity in the commercial real estate market depends on the general situation in the real estate market and in the financial market. And if we talk about the financing of commercial real estate, then a lot depends on the situation in the wide financial market, but it is also important to have additional tools that are used in the market now and help to survive crisis times with minimal losses. If a lot has already been written about the first one but not for the second topic. Let us try to examine in more detail the existing tools with Andrey Protasov, managing director of ILM.

- Andrei, what is happening now with crediting in real estate?

- The source of crediting in our market is only banks, and the source of own funds, as a rule, are private investment funds. Each of these players operates within its strategy and capabilities - this limits the availability of capital for real estate, although there is capital in the country whose owners would like to invest in real estate, but do not have the right tools. In the west, there are tools that allow a wider range of investors to take part in investing in real estate, in addition, there are more types of players.

- What tools and market participants exist in the west that we don’t have?

- In the west, there is a tool CMBS (Commercial Mortgage-Backed Securities), which allows you to transfer loans to commercial real estate to other investors. In this scheme, all work on the issuance of loans, including verification of assets, legal documentation and the actual issuance of financing, is done by the bank, but then it essentially sells the right to claim these loans to investors.

These CMBS instruments receive investment ratings and are then sold to investors who themselves would not be able to issue loans due to the lack of expertise and the availability of the required amount of funds. As a result, for example, loans for ten objects are resold to hundreds of investors, and each receives the required diversification and profitability level.

In Russia, a similar instrument exists in the mortgage sector, where banks issue loans, and then resell them with AHML, which in turn repacks them and resells them to various investors in the financial market. Without this mechanism, it would be impossible to increase the issuance of mortgage loans for housing.

Even in the West, active players in the credit market are not only banks, but institutional investors, namely, debt funds, insurance companies and pension funds.

- Why is there no such option in our market?

- First of all, these are natural causes - an insufficient number of investors who have the appropriate required risk profile - low risk, low profitability. In addition, the lack of appropriate expertise within the relevant organizations affects.

The insurance and pension industries have existed in the West for over a hundred years, and the leading players in these sectors have been operating for more than fifty years. As a result, they have a huge amount of capital, which they have accumulated over the period of their existence. In Russia, there are only a few players who have existed for more than 15 years, and they have not yet had time to accumulate enough funds to become significant players in the real estate market. However, they are presented. However, regular restrictions on the amount and form of funds invested by insurance companies and pension funds also play a role.

- With credit financing is understandable. But investing in real estate own funds - how is things in Russia in this regard?

- Here the tools and types of players do not differ from what is in the west. Only the breadth of use and the activity of certain players differ.

The largest investors in real estate in the west are pension funds and insurance companies. Here these players are not so active.

Significant players in the west are also various structures and forms of collective investment. The main structure is REIT (Real Estate Investment Trust), and each developed country has its own implementation of this idea. The main goal of the structure is to create a mechanism for collective investment, which will protect investors and be convenient for them from a tax point of view. They regulate the relationship between the management company, the assets of the fund (cash or real estate) and the shareholders (investors). They do not pay income tax on operations within the fund, each shareholder pays this tax in accordance with their tax regime (for example, individuals pay only personal income tax).

Investing in REIT is very common among private investors in the west. In Russia, this form appeared in the early 2000s and is called ZPIFN (Closed Share Investment Real Estate Fund). The tool began to gain popularity among small private investors in 2004. However, the 2008 crisis and fraud by a number of management companies led to a loss of investment in the vast majority of such tools. As a result, this tool is now used only (with a few exceptions) to protect property rights and information about ultimate owners and to optimize taxation. However, I am sure that over time this tool will begin to gain popularity among private investors, since there are no alternatives to it. For several years, there have been funds managed by a management company established by Sberbank. Its team manages to fill its funds with attractive assets and, as a result, show income to its investors.

- Crowd funding platforms as applied to real estate are becoming an increasingly debated topic. Is there a future for such a format in our country?

- Definitely - yes! This is a promising and sought-after tool. In essence, this is a collective investment mechanism (which can be built on the basis of closed-end investment funds), complemented by the opportunities that the Internet represents. Attraction and interaction is carried out through the Internet, which reduces the costs of the Management company and increases the transparency and convenience for the client-investor. This form is relatively young and only developing, although in the West there are already about a hundred startups in this area. In Russia, AKTIVO, founded by renowned Internet entrepreneur Oscar Hartman, is a prime example. An effective Internet platform has been created, but success will depend on whether the team succeeds in finding attractive investment opportunities and adequately manage the acquired assets.

A necessary component of success in the collective investment market is investor confidence, which is determined by reputation and success. An investor is only as good as his last deal!

 

Posted by cre.ru