Debt specialists met the market’s challenges in 2019

The winners of the Real Estate Capital Awards 2019 demonstrated creativity against a backdrop of challenging market conditions.

The top-line takeaway from the results of our 2019 awards – which we revealed this week and can be found in full here – is that European property debt professionals’ jobs became more difficult. But their appetite to do business remained strong.

Although 2019 was a year of uncertainty on several fronts, including Brexit and the eurozone’s weakening economic outlook, central bankers’ decisions to keep interest rates low ensured a continued flow of capital into Europe’s commercial real estate markets. With property prices high and owners reluctant to sell, deploying capital became a challenge for managers of equity and debt alike.

On the equity side, some managers met that challenge by investing large sums of money in real estate portfolios or platform deals. This led to big-ticket financing mandates for investment banks and, in one notable merger and acquisition deal, for a private debt fund manager. The weight of capital on the credit side of the real estate industry put pressure on debt fund managers and insurance company lenders to diversify their businesses, either by loan product, sector or geography.

Our awards recognise a diverse mix of organisations, including various types of lenders, borrowers and advisors. However, what all our winners have in common is that they demonstrated creativity in their approach to the real estate debt market. For some, that meant adapting their strategies to introduce senior or high-yielding lending into their repertoires. For others, it meant doing debt deals in emerging segments such as flexible workspace or build-to-rent residential, where finance is less plentiful.

Debt market participants’ increased willingness to explore European jurisdictions in search of business was also evident. For example, all but one winning organisation within the Southern Europe awards categories are based outside the region. In addition, US-headquartered lenders and borrowers were prominent in the winning deals from our Germany and France awards categories. Our decision to introduce country and region-specific awards categories was made, in part, to recognise an increasingly international and diverse profile of lenders, borrowers and advisors across individual country markets.

Analysis of the awards results for the UK, Germany, France and Southern Europe can be found here, as well as insight into the results of our pan-Europe categories.

Looking forward, Europe’s real estate finance markets will remain challenging. Capital will continue to flow into debt and equity strategies so long as real estate maintains a reasonable premium over bonds and gilts, and that capital needs to be deployed against the backdrop of an elongated cycle. Those in the business of writing, sourcing or advising on commercial real estate loans will stay in demand, but their jobs will not get any easier.

Email the author: daniel.c@peimedia.com