HSH Nordbank AG, based in Hamburg and with total assets of €205 billion, is a leading provider of marine and real estate finance. Editor Richard Flemingrecently talked with Dr. Michael Schwalba,head of real estate structured finance, about the evolving focus of the bank’s real estate finance activities and the prospects for a return of confidence and a resumption of normality in the securitisation and syndication markets.

“It’s the economy, stupid.” Isn’t it always? There are people out there who have never known a U.S. president who is not called Bush or Clinton — but that will change early next year — and there are people out there who have not experienced an economic downturn, and that will change, too. The last part of the last century and the first part of this, apart from the occasional blip often caused by regional conflict, have been extraordinarily benign from an economic point of view.

For the same risk-adjusted returns, real estate investors will always prefer big real estate markets to small ones for the simple reason that big markets provide choice. The outlook for smaller markets, of course, can often be more favourable, but that point becomes moot when there are no opportunities to invest or when competition for the relatively few transactions that are available drives pricing to unattractive levels.