Allan Saunderson is managing editor of Property Finance Europe and a contributor to GlobeSt.com.

LONDON-The banking crisis has opened up interesting opportunities for investors to buy distressed debt, says Paul Severs, finance partner at London law firm Berwin Leighton Paisner.

He told a panel at the European Real Estate Opportunity Private Fund Investing Forum in London last week however that investors need to be cautious and consider wider issues, including possible government intervention in the marketplace. Because of the still-limited condition of bank financing, the unwillingness of Pfandbrief-financed German banks to lend over 60% loan-to-value, and conservative lending ratios of non-German institutions, mezzanine financing – pseudo-equity that funds higher parts of the debt structure – is coming to the fore.

"It is still a minefield out there. Investments and investment structures are being constantly tested by unprecedented market conditions," Severs said. "We are advising our clients who are buying real estate related debt to consider wider issues such as the likelihood of government intervention in addition to the more obvious factors such as the position in the capital structure, total leverage, real estate yields and lease run-off dates."