fabio pugini
DESCRIPTION
Conferinta Finantarea Proiectelor publicein Europa: "Leasing: Activities of national and European associations"TRANSCRIPT
R.E. Leasing: Activities of national and European R.E. Leasing: Activities of national and European associationsassociations
BBucarest – March 20th 2007ucarest – March 20th 2007
Speaker: Fabio Pugini, MCC Spa, ItalySpeaker: Fabio Pugini, MCC Spa, Italy
2
ContentsContents
Real estate leasing: structure and featuresReal estate leasing: structure and features
Brief overview of european R.E. leasing marketBrief overview of european R.E. leasing market
Leaseurope initiative to foster R.E. leasing: the new Leaseurope initiative to foster R.E. leasing: the new steering groupsteering group
3
Real estate leasing: structure and featuresReal estate leasing: structure and features
Brief overview of european R.E. leasing marketBrief overview of european R.E. leasing market
Leaseurope initiative to foster R.E. leasing: the new Leaseurope initiative to foster R.E. leasing: the new steering groupsteering group
ContentsContents
4
11DefinitionDefinition
Advantages for Advantages for clients (Lessee)clients (Lessee)
Advantages for Advantages for financial institutions financial institutions (Lessor)(Lessor)
Leasing payments are
deductable offering a
fiscal shield (and
benefit!) that varies
depending on the
minimum allowed
duration (usually much
shorter than
amortization)
Higher LTV with
respect to loans: lower
initial investment
Availability of product
packages: financing +
insurance + legal
support + technical
support + …
22
Credit risk mitigation
thanks to the asset
property
Lower regulations
capital absorption
Many economic
and operative
advantages (at
both client and
bank side) make
R.E. leasing a
financial
solution
preferable to
loan in a plenty
of cases
The financial leasing contract: structure and benefitsThe financial leasing contract: structure and benefits
By means of a financial
lease contract the lessee
obtains the right to
exclusively use or exploit
equipments or real estate
properties owned by the
lessor for a fixed period of
time during which payments
are due
At the end of the contract
the lessee has the
opportunity to purchase the
leased asset at a bargain
price, becoming the owner
of the asset
5
Fiscal benefit comparison: loan vs leasing (the italian case)Fiscal benefit comparison: loan vs leasing (the italian case)
tt00 tt11 tt22 tt33 tt44 tt55 tt66 tt77 tt88
R.E. Purchase R.E. Purchase by Lessorby Lessor
R.E. Purchase R.E. Purchase by Lesseeby Lessee
Payments over the lease termPayments over the lease term
tt99 tt1010 tt1111 tt1212 tt1313 tt1414 tt1515
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LeasingDeduction of leasing payments (capital and interests):
Italian case (6,7% of financing each year)
tt00 tt11 tt22 tt33 tt44 tt55 tt66 tt77 tt88
R.E. Purchase R.E. Purchase by Clientby Client
tt99 tt1010 …… …… …… …… tt3333
Direct purchase (loan)
Linear amortization over the life cycle of the asset:
Italian case (3%)
End of End of amortizationamortization
6
R.E. lease contract structure: the italian case R.E. lease contract structure: the italian case Average value of first up-front payment and option to purchase as a percentage of Average value of first up-front payment and option to purchase as a percentage of the asset valuethe asset value
22
Outstanding New Business
2005 2004 2005 2004
Automotive 7,3 7,2 8,2 7,9
Real Estate 11,5 10,6 12,1 9,7
Equipment 1,4 1,2 1,5 1,1
Ships, Aircrafts, Rolling stock 4,3 4,5 2,6 2,0
Up-front
Option
Real Estate leasing is particularly convenient for the client due to low up-front payment and final option to purchase
Outstanding New Business
2005 2004 2005 2004
Automotive 11,1 11,2 10,9 11,4
Real Estate 11,9 11,7 12,0 12,2
Equipment 8,4 8,1 8,3 8,4
Ships, Aircrafts, Rolling stock 26,8 27,2 28,6 32,0
For both first payment and option slight decline in percentage value during the first half of 2006
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Real estate leasing: structure and featuresReal estate leasing: structure and features
Brief overview of european R.E. leasing marketBrief overview of european R.E. leasing market
Leaseurope initiative to foster R.E. leasing: the new Leaseurope initiative to foster R.E. leasing: the new steering groupsteering group
ContentsContents
8
7,00%
3,17%
2,93%
2,05%
6,52%
0,56%
5,74%
6,77%1,28%
2,48%
3,65%
5,02%
0,73%
1,33%
0,27%
• Italy is ranked number one in Europe as far as R.E. Leasing is concerned
• Many countries show remarkable growth opportu-nities still to be pursued
€€/Billions/Billions
Source: National Leasing Associations, LeaseuropeSource: National Leasing Associations, Leaseurope
ItalyItalyGermanyGermanyFranceFranceSpainSpainAustriaAustriaUKUKGreeceGreecePortugalPortugalBelgiumBelgiumCzech Rep.Czech Rep.NetherlandsNetherlandsSloveniaSloveniaDenmarkDenmarkHungaryHungaryPolandPoland
11
22
33
44
55
66
77
88
99
1010
1111
1212
1313
1414
1515
00 1010 2020 3030 4040 5050 6060 7070
Outstanding/GDPOutstanding/GDP
The comparative analysis of Outstanding / GDP is a good indicator of the RE Leasing penetration margin
European Real Estate leasing market ranking by outstanding European Real Estate leasing market ranking by outstanding 1/h 20061/h 2006
RomaniaRomania22220,07%
9Source: Leaseurope, National Leasing Associations, elaboration of 1/h 2006 data by Source: Leaseurope, National Leasing Associations, elaboration of 1/h 2006 data by R.E.S.G .R.E.S.G .
Total R.E. leasing new Total R.E. leasing new business (2005) in Europe:business (2005) in Europe:
46,8 Billions Euro46,8 Billions Euro
R.E. Leasing new business size and trendR.E. Leasing new business size and trend
10
RE Equipment Automotive
• Almost half of new business in Italy is relevant to Real Estate leasing
• In other countries the RE percentage spans from almost zero to one third of the new business
Automotive leasing data Automotive leasing data are currently not are currently not
available for Romaniaavailable for Romania
ItalyItaly GermanyGermany FranceFrance SpainSpain AustriaAustria PortugalPortugal BelgiumBelgium HungaryHungary RomaniaRomania
Leasing new business breakdown by type of contract – 2005Leasing new business breakdown by type of contract – 2005Some examples (not exhaustive)Some examples (not exhaustive)
11
(mio €)
0
10.000
20.000
30.000
40.000
50.000
60.000
Vehicle + Equipment Real Estate
Real Estate Leasing percentage weight and total new business became sensible only in the late ’90s
Nevertheless the YoY growth ratio increased steadly (except for 2003 and 2006) since early ’90s
19.2% 19.2%
-18.6% -18.6%
29.4% 29.4% 38.6%38.6%
22.6% 22.6% 39.0% 39.0%
70.0% 70.0%
31.1% 31.1%
-8.9% -8.9% 9.0% 9.0%
YoY YoY growth growth
Italian leasing new business growth in the last 15 yearsItalian leasing new business growth in the last 15 years
12
Other leasing companies
16,9%
Top 1583,1%
(74,2% in the total leasing mkt)
Italian Real Estate leasing market is highly concentrated with Top 15 companies collecting more than 83% of total new business
Similar concentration, nevertheless, is also present for other leasing products
Italian Real Estate Leasing market concentrationItalian Real Estate Leasing market concentration
13
<=0.5 mil. €10%
> 0.5 mil and 2.5 mil.€
22%
>2.5 mil.€39%
<0.5 mil.€3%
>0.5 mil.€ and <= 2.5 mil.€
11%
>2.5 mil.€15%
To buildTo build
AlreadyAlreadybuiltbuilt
“To build” leasing (29% of total RE leasing) still has good growth margin but new tax regulation (sept. 2006) will jeopardize the market (focused later on)
Breakdown by type of R.E. lease contract in ItalyBreakdown by type of R.E. lease contract in Italy
14
Market concentrationMarket concentration R.E. Leasing business is mainly
concentrated in few economies (more than 70% of the business is in the hands of 5 countries)
Results of the round table Description
Growth opportunitiesGrowth opportunities Even in consolidated markets (not to
mention Eastern Europe…) evident business opportunities emerge as denoted by many indicators (growth trends, R.E. leasing penetration as percentage of total leasing business, as percentage of GDP, as percentage of total R.E. business, …)
Heterogeneity in market Heterogeneity in market regulations regulations
Growth is mainly driven by fiscal benefits which sensibly vary across Europe as many other legal aspects
Heterogeneity in Heterogeneity in operations operations
R.E. leasing, even in a Basel II perspective, is still operated very differently across Europe
• The richness in diversity can be turned into new business opportunities
• In order to leverage such diversity, building a common R.E. leasing knowledge, the european leasing association (Leaseurope) recently launched a steering group focused on “real business” issues
R.E. Leasing market: synthesisR.E. Leasing market: synthesis
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Real estate leasing: structure and featuresReal estate leasing: structure and features
Brief overview of european R.E. leasing marketBrief overview of european R.E. leasing market
Leaseurope initiative to foster R.E. leasing: the new Leaseurope initiative to foster R.E. leasing: the new steering groupsteering group
ContentsContents
16
National and european Leasing Associations:National and european Leasing Associations:
Examples of Leasing Associations Examples of Leasing Associations
The opportunities of R.E. Leasing Markets widespread all over Europe fostered the creation of national and European leasing associations aiming at developing leasing business and facilitating clients knowledge of such financial instrument
Leaseurope: 33 National associationLeaseurope: 33 National association
17
A new initiative from Leaseurope :A new initiative from Leaseurope :The R.E. Leasing Steering GroupThe R.E. Leasing Steering Group
A new Steering Group has been recently set up (November 2006) by Leaseurope on Real Estate Leasing involving many country associations and banking members
As Chairman of the S.G. Leaseurope appointed Mr. Paolo Alberto De Angelis C.E.O. of FinecoLeasing and CoManaging Director of MCC, both from Capitalia Group, Italy
The main goals of the S.G. are: To build-up a common know-how
on RE Leasing leveraging the best practice of member countries
To face challenges of the RE Leasing business and to define strategies to overcome them
To develop business opportunities in member countries based on success cases of other members
# of Members
ItalyItaly 2
AustriaAustria 1
BelgiumBelgium 1
GermanyGermany 2
DenmarkDenmark 1
SpainSpain 2
FranceFrance 3
United K.United K. 1
HungaryHungary 1
PortugalPortugal 1
UkraineUkraine 1
RomaniaRomania 2
The involvement of 12 countries and 18 active members (plus Leaseurope secretariat) is encouraging and goes beyond first expectations
Participating countries are not only those with consolidated R.E. leasing business but include emerging markets and nations that recently joined EU
18
Kick-off meeting of the R.E. Leasing Steering GroupKick-off meeting of the R.E. Leasing Steering GroupRome 11/10/2006Rome 11/10/2006
The first action of the Steering Group was gathering for members’ appointment and setting up of the activities on the agenda
Mission statementMission statement Definition of the mission of the S.G.
Members’ commitment
Goals of the meeting Description
Introduction & Introduction & Overview Overview
Members’ introduction (bio-profile and company profile)
Overview of national R.E. Leasing markets (size, trends, opportunities, threats)
““Hot” topics and Hot” topics and open issuesopen issues
Selection and first brief discussion of topics of interest to be further focused and developed by the S.G. during next meetings
11
22
33
19
Examples of selected topics to developExamples of selected topics to develop
StatisticsStatistics Support the Statistic Committee with drivers definition and
standardization
TopicsTopics Aspects to be focusedAspects to be focused
TaxationTaxation Analyze minimum duration, fiscal framework and V.A.T.
management
R.E. FundsR.E. Funds Evaluate impacts of R.E. Funds on R.E. Leasing market
IAS ImpactIAS Impact Assess the impact of IAS on R.E. Leasing market
Cross Border Cross Border Select cross border business opportunities and relevant management
RegulationRegulation Define a synthesis framework for R.E. leasing regulation (out of fiscal treatment)
Asset valueAsset value Draft possible techniques for evaluation of the leased assets
Compare procedures for asset retrieval and defaulted clients management
Defaulted clientsDefaulted clients
Analyze public subsidies to R.E. Leasing (even at local level) Public subsidiesPublic subsidies
Further developed in the following
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R.E. leased assets evaluation: duties and opportunitiesR.E. leased assets evaluation: duties and opportunities
Basel II Requirements
DescriptionDescription ImplicationImplication
In order to benefit from favourable LGD In order to benefit from favourable LGD treatment for RE leasing, the following treatment for RE leasing, the following conditions (among others) must be conditions (among others) must be verified:verified:
Premises fair value must be Premises fair value must be monitored and updated periodicallymonitored and updated periodically
Exposure must be less than a Exposure must be less than a specified percentage of RE leased specified percentage of RE leased assets valueassets value
Market opportunities
A deeper Real Estate market knowledge A deeper Real Estate market knowledge is useful to correctly evaluate is useful to correctly evaluate investments and avoid fraudsinvestments and avoid frauds
RE leased assets must be RE leased assets must be monitored in order to monitored in order to ensure a lower capital ensure a lower capital absorptionabsorption
Monitoring is a business Monitoring is a business opportunity to pursueopportunity to pursue
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Basel II framework for R.E. leased asset value monitoringBasel II framework for R.E. leased asset value monitoring
The application of Basel II rules to Real Estate valuationThe application of Basel II rules to Real Estate valuation The frequency of the evaluation is merely based on
the typology of the premises as follows: Residential properties: 3 year Non - Residential properties: 1 years
There are two ways of estimating the premises: By entrusting the evaluation to an “indipendent
surveyor/specialist” (one-to-one approach) by using statistical methods (massive approach)
Even if the statistical method is adopted, specialist’s valuation is compulsory for financial exposures up to € 3 million / 5% of the bank regulatory capital
1 Year(One-to-One)
3 Year(One-to-One)
1 Year (One-to-One)
(Massive)
3 Year (One-to-One)
(Massive)
VALUEVALUE > 3
Mio
or >
5%
R.C
.>
3 M
io o
r > 5
% R
.C.
< 3
Mio
& <
5%
R.C
.<
3 M
io &
< 5
% R
.C.
Non ResidentialNon Residential ResidentialResidential
Statistical approach can be used between Statistical approach can be used between two successive evaluationstwo successive evaluations
Statistical approach can be used between Statistical approach can be used between two successive evaluationstwo successive evaluations
Type of REType of RE
22
Examples from R.E.S.G. Members: ItalyExamples from R.E.S.G. Members: Italy
Basel II application: from 01/01/2008Basel II application: from 01/01/2008
MCC S.p.A. caseMCC S.p.A. case
MCC have chosen to adopt statistical approaches where applicable and to get market drivers informations externally by an authoritative provider: NOMISMAShort Term
Mid Term
MCC is planning to integrate NOMISMA’s service with more specific RE leasing market informations based on ASSILEA’s RE market monitoring projects
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MCC’s Short Term statistical approachMCC’s Short Term statistical approachCriteriaCriteria Initial premises Book Value (purchase value) is yearly updated multiplying it by a correction factor (“revaluation index”) provided by NOMISMA The proper revaluation index to be used for each asset is calculated based on asset’s characteristic (“drivers”):
Typology of the premises (6 different categories) Location (8 different categories) Date of the last specialist’s evaluation
Geographical resolution is quite accurate: based on the postal code (usually corresponding to municipal districts for small cities, or quarter, for bigger cities)
Well established: founded on 1981 Authoritative: lunched by a group of economists and statisticians, leaded by the Prime Minister Independent: it currently is a public limited company whose the main shareholders are the major financial and entrepreneurial italian groups Specialized: it’s specialized in Real Estate valuation projects on demand, but it also realizes its own “products” in co-operation with specific
Observatories (e.g.: RE market, Agricultural market, etc…)
External provider: NomismaExternal provider: Nomisma
24
MCC’s Mid Term statistical approachMCC’s Mid Term statistical approachConsiderations Considerations Nomisma’s revaluation indexes are a little bit generic while RE premises value depend on a variety of different drivers Assilea is developing a RE market monitoring database in co-operation with the Territory Agency (public authority focused on
advertising services, supervision of the RE market Observatory and valuation services) based on a well detailed classification of premises
MCC is evaluating to integrate Nomisma and Assilea indexes for a more accurate estimate of RE asset values
Assilea RE market monitoring framework Assilea RE market monitoring framework
RE Leasing Companies Assilea Territory Agency
11 When purchasing a new RE asset, each leasing company fills up a form and sends it to Assilea
22 Assilea elaborates RE leasing statistics and shares them with the Territory Agency
33 Territory Agency joins Assilea database with a pervasive monitoring database on C-to-C RE purchase acts. (info recovered from notary)
44 Assilea issues an elaborated revaluation index to partner leasing companies
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Further activities of R.E. Leasing Steering Group on Further activities of R.E. Leasing Steering Group on this issuethis issue
By collecting more answers to the questionnaire broadcasted among members we will:
- Analyse the asset evaluating costs
- Improve statistical techniques
- Compare the adopted approaches
- Define good practices
- …
By collecting more answers to the questionnaire broadcasted among members we will:
- Analyse the asset evaluating costs
- Improve statistical techniques
- Compare the adopted approaches
- Define good practices
- …
The Steering Group will develop, for this issue as well as for other selected topics, “white papers” i.e. shared guidelines aimed at facing and solving main R.E. leasing concerns
Final goal is to foster R.E. leasing in each member country by enriching product knowledge, sharing expertise, defining good practices, selecting business development initiatives