European banks need to face up to and deal with their real estate assets if credit markets are to improve over the coming year.
Olivier Piani, speaking to PERE at the Pension Real Estate Association spring conference in Washington DC today, said European lenders had dealt with their “financial assets” but had yet to take action over their problem real estate investments.
The chief executive officer of Allianz Real Estate, part of the German insurance company, said lending would not improve significantly until European banks took similar actions to US banks.
“Banks in Europe have dealt with their financial assets and problems. I don’t think they have dealt with their real estate problems unlike many American banks.”
He said the European banks were feeling the pain of their real estate investments but “it’s a question of facing and dealing with it”.
Piani was speaking as part of a “foundations to recovery” panel on the second day of the PREA conference.
During the panel, Bob Larson, chairman of Lazard Real Estate Partners, said despite the collapse of the credit markets and fears of a “wave” of commercial real estate loan defaults over the next two years, there was increased optimism among private equity real estate professionals.
“Hidden in the challenges for commercial real estate over the next six to 12 months is the incredible opportunity coming out of that environment,” he said. “All of us are going to be challenged to find where those opportunities are but I see more upside than downside.”