Interview with Head of Real Estate ING
Head of Real Estate - Hein Wegdam
- Name: Hein Wegdam
- Current occupation: ING Head of Real Estate Finance NL
- Study: MSc Real Estate, Amsterdam School of Real Estate
ING Head of Real Estate Finance NL, Hein Wegdam (37), began his career in the real estate industry after studying construction-technical business administration. He started as an account manager at ING Real Estate Finance (REF) in Amsterdam and later he got the opportunity to become a relationship manager, securing more than 75 million euros in loans in just half a year in that role. Wegdam then pursued international experience in sustainable finance and was eventually promoted to lead sustainability and innovation in the Netherlands for ING REF. In July 2021, he was appointed as Head of Real Estate Finance NL and is responsible for commercial real estate investors, ranging from individual investors to large family businesses or real estate funds. In 2018 he constructed the first-ever commercial real estate ESG linked loan where pricing was linked to the level of a borrower’s GRESB performance rating.
"What are some trends in the real estate sector that you see in the current economic climate, and what are your expectations for the future?"
Well, in the current economic climate, the interest rates are unusually high compared to the last 6 years. It is hard to predict what the interest rates will do in the long term, but I would be surprised if they would return to the exceptionally low levels during the Covid-crisis. However, if you are a long-term investor and have an enterprising character, investing in real estate is still interesting even in the current climate. Another trend is the increasing regulations in the mid-rental sector, which is having a strongly disruptive effect. The free market is increasingly getting disturbed, which is a phenomenon that is not to be desired in my opinion. Due to the increased regulations, fewer residential homes are entering the markets while we see an increase in homes for sale. For the buyers’ market interesting opportunities may be coming, while for the rental market it will only become a bigger problem. We still have a shortage of a million homes until 2030, so there is still demand but fewer people can afford them due to high mortgage rates.
"Sustainability is becoming an increasingly “hot topic” within the world of finance. Is a similar trend visible in the real estate sector?"
Absolutely. The desire for green projects keeps getting bigger and bigger. Nearly half of the projects that we finance have an energy label “A” (Almost the highest possible level of sustainability in the Netherlands). This is also beneficial to ING as green projects are regarded as safer by the EU and we think the risk of default is therefore estimated to be lower. Consequently if regulator shift their capital requirements on green assets, banks needs to hold less capital with regard to green projects which saves costs as holding capital is expensive. So, if we get the choice between funding a “green project” or a “grey project”, we usually choose the green one as it allows us to get the best rate for our clients and limits our risk exposure simultaneously. I truly believe that sustainability is not just a hype but is here to stay.
Another trend that is arising relates to physical climate risks. Our clients are asking us more and more about these physical climate risks. Namely, where are assets located, and are these locations at risk for drought, flooding, heavy rainfall, etc. So with regards to sustainability, you see amongst others trends of green energy transition and resilience around physical climate risks.
"How does data (analysis) play a role in financing activities for real estate?"
Data is very important, and its importance is becoming greater still. Firstly, we together with other banks are working on standardising data regarding business reporting. An initiative called SBR. This would allow an appraiser to upload his findings and data directly into our system and it allows investors to share new lease data. In this way, we are able to collect data straight from the source.
Secondly, we are working intensively on KYC: Know Your Customer. This relates to questions such as “Where are your proceeds coming from?” Every bank must ask these questions in its own way as a gatekeeper for the financial system. We are working with other banks to see if data exchange is possible on this topic. This would allow an investor who works closely with multiple banks to fill in personal information once and allow the banks to exchange it among themselves.
Lastly, we are working with A.I. technology to build automated credit models. These models can review entire portfolios automatically every day and highlight the files that need to be looked at more closely. This allows approximately 80% of the portfolio to be reviewed automatically and it gains a lot of efficiency. We also developed a model that can extend up to 75% of the expiring loans automatically. Finally, we are developing models that can tell ourselves and our clients automatically what amount of loans they can get financed and at what interest rate. The use of these models allows us to increase our quality and decrease our risk.
"If you want a career in real estate (at ING), where should you start?"
You can always send us an email of course! We are always looking for young talent and have interns at all times. At the moment we have three interns in our REF department and starting positions are generally available. As a student, you can apply for a traineeship or an internship. What I think is unique with regard to working at a bank is that you get the chance to oversee the entire market in different sectors in a way that would not be possible from the perspective of a single firm. Also, within banking, there is a wide array of possibilities. I, for example, started in sustainable finance but am now also responsible for the IT delivery department. We see a lot of different people with entirely different backgrounds ranging from real estate studies to financial studies. We have “hard-core” financial analysts, but also innovating data scientists and advising real estate specialists. Working together to finance the ambitions of our clients and making the built environment more sustainable. We are always in need of talent at ING. Now more than ever!