The firm said the move is being driven by a view that underlying commercial real estate valuations are improving while returns on loans to the sector are still very attractive. This means that in ING’s opinion, the prospects for growth are undervalued and it fits the profile of many institutional investors searching for yield in the current low interest rate environment.
With this being the case ING IM has joined forces with ING Real Estate Finance to provide a new bespoke commercial real estate loan portfolio service for institutional investors.
The first client for the new service is insurer Nationale-Nederlanden Life, a subsidiary of ING. It has put up €400m initially, and potentially this will rise to €750m.
ING IM has a long record of investing in commercial real estate assets with around €2bn held, while ING REF has a loan book of around €25bn.
ING says its plans are supported by 2013 data which it says indicate that after the long downturn commercial real estate valuations have either stabilized or are increasing again.
Commercial real estate transactions totalled almost €66.5bn last year while €28bn in real estate loan portfolios were bid for. Issuance of the asset class in the USA has increased by over 3000% from a low of $2.7bn in 2009 to $86.1bn last year on signs of economic recovery.
The continued reluctance of European banks to lend into the sector and meet any uptick in demand means the door is wide open for non-bank lenders to step in, ING said.
“This new and unique proposition allows ING REF to leverage its origination and lending capabilities to bridge the gap in the market between capital providers looking for attractive spread products, and real estate companies seeking loans for acquisitions and refinancing,” said Peter Göbel, chief executive of ING REF. “This partnership will bring additional liquidity to the commercial real estate loans market and could provide attractive returns for institutional investors who are providing the capital,” he added.
CIO at Nationale-Nederlanden Life Jelle van der Giessen has fully bought into this line of thinking. “I believe stepping into commercial real estate loans now is the right moment in the cycle,” he said. “This investment fits our strategy to participate direct into the real economy through asset classes such as infrastructure and commercial real estate loans, which is of increasing interest to insurance companies,” he added.
