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The growing number of insurers interested in financing real estate in the French market is a welcome development, according to Philippe Duvergne, head of real estate finance in France for German lender pbb Deutsche Pfandbriefbank. ‘It is good that there is more competition and that we are seeing more debt funds,’ he told PropertyEU's France Investment Briefing in London last week.

In the past 12 to 18 months, a number of insurers including AXA and Allianz have stepped up their efforts in the area of property debt financing due to the growing funding gap and attractive margins. Although they have ambitious targets, so far their lending portfolios are significantly lower than those of the traditional lenders. Allianz has a big real estate lending portfolio in the US, while in France its target for this year is around EUR 500 mln to EUR 1 bn, Duvergne pointed out.

In June La Française REM announced that it is launching a property debt platform and that it initially plans to raise EUR 600 mln from institutional investors representing local and foreign insurance groups. Initially, the equity will be invested exclusively in senior debt backed by French real estate with a core/core plus profile. The target spread is 250 basis points.

Deutsche Pfandbriefbank is most interested in financing prime assets with good covenants and a low level of leverage, Duvergne said. Medium-sized assets will also be considered, but the competition to obtain funding is strong, and Deutsche Pfandbriefbank is not looking for opportunistic transactions, he noted. ‘We are able to provide financing, but we’re not doing everything.’

While Paris remains the main port of call for both foreign investors and financiers, there are some opportunities outside the French capital, Duvergne said. ‘Most French provincial cities are too small, but there are opportunities in Lyon and Marseille,’ he added, pointing to major mixed-use developments such as Confluence in Lyon and Euroméditerranée in Marseille.

Investors seeking distressed loan portfolios may be disappointed, said Olivier de Molliens, deputy CEO of Paris-based Colliers International Keops. ‘There has been talk about distressed loans for four years, but we haven’t seen anything, at least not on the main market.’

Duvergne pointed out, however, that negotiations on non-performing loans are generally held off-market. ‘A consensual sale is much easier to agree than a distressed one,’ added Jonathan Baines, head of central London investment at Colliers International. ‘It’s quite a complicated market to get right.’