Real Estate Securitisation - A Comparison Of European Debt Securitisation Structures

Real Estate Securitisation has become a broadly discussed topic during the last 2 years. There are many initiatives and discussions around the topic of Real Estate Investment Trusts, Commercial Mortgage-Backed Securities and Real Estate Asset-Backed Securities. While the term ìReal Estate Securitisationî is used in many ways, it lacks, however, a common definition and differentiation. The first step of this paper is, hence, to clarify the subject of Real Estate Securitisation, thereby defining and differentiating Debt from Equity Securitisation. The main focus of this research piece, however, shall lie on Debt Securitisation. In order to thoroughly analyze the industry, it is important to understand the different transaction schemes that are used in the European Debt Securitisation industry. This paper compares different transaction structures in European capital market real estate financings. The functioning of such structures will be derived as well as the implications of these structures for the real estate financing market. The results will be underlined by a case study based analysis of large residential real estate portfolio Securitisation transactions. The proposed conclusion is that there are many different transactions structures that all lead to the nearly same result of price-efficient funding for acquisitions of large real estate holdings. The main proposition is that due to long standing and stable cash flows, residential real estate transactions are the initiating drivers of Real Estate Debt Securitisation markets in Europe. As a conclusion this paper hints at a rising German Debt Securitisation market, fuelled by the Securitisation of large private equity portfolios.