Although almost all investors in the Danish real estate market over the last 10 years have run for the exits at the idea of issuing real estate bonds to finance construction and real estate projects, the caution may be bordering on excessive.
In fact, the much-criticized bonds hold benefits that banking or mortgage financing can not match, according to the two Bech Bruun lawyers Henrik Westermann and Babak Eftekhari in an opinion piece that EjendomsWatch, an AMWatch sister site, published last Tuesday.
They point out that investors in Sweden and Norway to a wide extent use bond issues that, as a source of funding, enable realization of real estate projects where cash flow is uncertain.
"Despite the disadvantages of property bonds, they have so many advantages for the right real estate company and for the right property project that it is a loss for the Danish real estate industry that we do not yet have the same tools as our Nordic colleagues," the two lawyers write in the opinion piece.
Real estate bonds have lost their reputation mostly due to the fact that insufficiently capitalized companies were previously behind the issues, which even promised investors very favorable returns without having the necessary security behind.
Among the bondholders who burned their fingers during the financial crisis 10 years ago were investors in the now-defunct Keops, and property developer Jens Schaumann with his business at the time, Schaumann Properties, who used this form of financing.
English Edit: Marie Honoré