“We’re quite unique in the Netherlands as we offer debt, equity, capital markets and asset management all under one roof.”
If you’d pose the question: “soar with eagles or scratch with chickens?” Daan Reekers’ answer, founder and CCO of Adelaer, would be crystal clear: “soar, of course.” An eagle oversees the entire area with a sharp eye. Hence the name of our service provider that, since its establishment in 2015, has gained a strong position in the field of real estate finance. At Adelaer, this wide angle view is essential.
Adelaer’s vision is not only distinctive, but also valued by its customers. In just a few years, these financial architects realised almost 2 billion euros worth of real estate financing, with nearly 3 billion euros more in current applications.
“In the Netherlands, we’ll have to get used to paying more for our money”
Founder and CCO of Adelaer, Daan Reekers, occasionally expressed rather controversial views on real estate financing and the position of Adelaer within the market: “There is an annual financing need of around 6 billion euros within the Dutch real estate market, of which less than half is being funded by major Dutch banks such as Rabo, ING and ABN Amro. The other share, which banks are unable or unwilling to provide, must come from lenders such as insurers, hedge funds, institutions and foreign parties. These parties are not traditional financiers like banks. They already have a lot of influence in the Netherlands and their impact will only increase. As they are willing to take greater risks, this also means that higher margins are applied. As a result, the Netherlands will have to get used to paying more for its money. Dutch banks have traditionally established too little correlations between the risks they ran and the amount of the surcharge.”
It’s these parties – some of them Dutch but these days, most of them foreign ones (70% of production), with whom Adelaer does its business. For this reason, the company opened its own office in London, in addition to four offices in the Netherlands. Initially, with the London office, Adelaer wants to be close to the source, but it also contributes to distinguishing itself professionally on an international level.
Reekers: “If you look at real estate finance in the Netherlands, the aforementioned major banks only take on the senior part. They only finance the part they want to finance on assets. The large banks may call themselves real estate financers, but in reality they only finance the part with the lowest risk: the senior loans. Full real estate finance, however, requires a little more. The market in the Netherlands is not very well developed. That’s why we stepped into this gap four years ago and, following the example of London, Frankfurt and New York, want to offer more than debt finance while focussing on capital market activities. In other countries, it’s much more common to use an intermediary such as Adelaer for the financing or development of real estate. There are about 74 debt brokers active in London alone, each with its own specialty.”
THE COMPLETE PACKAGE
The addition to the Adelaer brand, ‘financial architects in real estate’ was not chosen by accident. That is, Adelaer wants to offer its customers more than just debt finance, and therefore also mezzanine (subordinated) loans and equity financing at a higher risk. Reekers: “We look at all the possibilities within the market, focusing on the entire financing structure, including financing options that are not so common in the Netherlands.” So, there is not only an annual gap of around 3.5 billion euros in real estate financing that needs to be bridged, says Reekers, but also a gap amongst the solutions themselves.
“German lenders for instance, do not want to finance private individuals”
Reekers: “Buying money is a profession. You need to know with whom you can do what, and under what conditions. We do business with dozens of different lenders, all of whom have their own conditions in relation to rate, terms and covenant agreements. We look way beyond the interest rate.” Regarding the latter, Adelaer offers creative solutions that take into account he fact that foreign lenders set different conditions than Dutch ones. For example, German lenders do not want to finance private individuals. If – for capital gain tax purposes – you want to structure your German capital in box 3, you’ll encounter a problem, and not just because the client is then personally liable for his mortgage debt. Adelaer once had a client who demanded a smart solution for this type of problem.
Reekers: “For this client, we entered a non-recourse financing for his box 3 investment and opted for a German lender. Because German lenders do not want to finance private individuals, we taxed the investment through a limited partnership. This partnership signs the non-recourse loan and, in this way, our client could secure his private equity a lot better. The conditions are considerably different than in the Netherlands.”
Regarding the future, Reekers is adamant: growth. And not grow for growth, but consolidating our position in the market. “We aim for a large volume as we are being acknowledged by international financiers such as Goldman Sachs, Metlife and J.P. Morgan. That is beneficial for our customers.
Up until now we structured around 2 billion euros, while there is still around 3 billion euros forthcoming. That is huge when you consider that the Dutch banks combined also give substance to a similar amount. We are fairly unique with our services in the Netherlands, mainly because we offer debt, equity, capital and asset management under one roof. We form a buffer between the bank and the client, and thanks to our independent position, we can offer our customers the best possible solution. We are paid by our customers and not by our lenders. We act on behalf of the interests of our customers and are true partners to them.”