The fifth edition of Real Estate Capital’s annual run-down of the leading providers of finance in European property markets provides a snapshot of a lending industry which is adapting to late-cycle conditions. Below, we reveal – and examine the strategies of – the organisations we see as the leaders in providing liquidity where it is needed.

A reminder of our methodology is worthwhile. Europe’s Top 40 Lenders is not a ranking – we do not grade organisations from one to 40. Rather, entries are grouped by type of lender; the banks, broken down by their country of origin, with the non-bank lenders profiled separately. While last year’s list separated insurers from debt fund lenders, with several managers lending both for insurance parent companies and third-party investors, such a distinction is not made in the following list.

As usual, deciding which firms made the cut was a challenging, yet fascinating, task. But, this year, for the first time, we’ve invited you to help us by making your own cases for inclusion. In June, a call for submissions was made and we are grateful so many of you answered. Making a submission in no way guaranteed inclusion in the list, but in an often-secretive market, having information on lenders’ performance was crucial when determining our final 40.

In addition, our editorial team scrutinised our archives, spoke to industry contacts and debated the merits of prospective entries.

The key question we asked is: which lenders made the most significant impact on the parts of the market they aim to serve?

Lending volumes were a consideration, although we accounted for the fact smaller loans can often be more complex than large facilities. We also considered which lenders demonstratively served the needs of borrowers, which organisations entered the countries and sectors where liquidity was lacking, and which conducted the most successful fundraisings.

We hope our Top 40 provides insight into the market, but also provokes discussion. We want to hear your feedback – please email the editor at daniel.c@peimedia.com. In the meantime, enjoy discovering who we consider Europe’s leading 40.

THE UK BANKS

BARCLAYS

• Senior, whole loan, mezzanine and development lender
• Active in the UK and Ireland
• £4.7bn new lending in 2017
• £2.3bn of new lending in H1 2018
• £15.3bn loan book

At the half-way point of 2018, Barclays Corporate Banking’s Real Estate team had originated almost exactly half of the £4.7 billion (€5.3 billion) written during the whole of 2017. In line with its rival UK clearing banks, however, last year’s total was down on 2016, when £6 billion of new lending was provided.

Deals completed this year reflect Barclays’ focus on UK residential lending, particularly in the UK regions. Transactions included a £21 million development loan for Cala Evans Restoration, a joint venture between Cala Group and Leeds-based Evans Property Group for 42 apartments in the West End of Edinburgh.

Elsewhere, Barclays provided a £27 million term loan facility for New Era Development to develop a mixed-use site including student accommodation in Sheffield, a £40 million investment term loan for London-listed Palace Capital and a refinancing and expansion to £25 million of an investment loan for Glasshouse Group.

The bank is also a player in the equity and debt capital markets. Deals included its role as joint financial advisor in the creation of Willmott Dixon’s Be Living and EcoWorld International joint venture and its role as arranger for a £350 million bond for residential specialist Grainger in April.

The bank’s focus on providing debt to support housing development was seen in the September 2018 announcement that it will partner the UK’s national housing agency, Homes England, in a £1 billion Housing Delivery Fund to encourage housebuilding by a diversified profile of developers.

“We believe that all of us in the industry, from lenders through to house builders, have a role to play in helping to address the desperate need for more homes in the UK, especially in the South East,” says Dennis Watson, the bank’s head of real estate.

LLOYDS BANK COMMERCIAL BANKING

• Senior, development, capital markets lender
• Active in the UK predominantly
• £8.4bn new lending in 2017
• H1 2018 lending undisclosed
• Loan book size undisclosed

Lloyds remains one of the UK’s most active bank lenders, with £8.4 billion (€9.4 billion) of new lending completed in 2017 – albeit slightly lower than the £8.6 billion reached in 2016. “Most of the clients we talk to recognise it’s late in the cycle,” notes Madeleine McDougall, global head of commercial real estate at Lloyds Banking Group.

Over the past 12 months, Lloyds has provided debt funding to support landmark new developments in London, including Ballymore’s office building at Embassy Gardens with an £82 million facility and Cain International’s The Stage, a mixed-used project to which Lloyds contributed £97.5 million of the total £390 million written by a club of five banks.

McDougall highlights the bank has also been “particularly active” supporting residential redevelopments in the Scottish market, where the development cycle started later than in London and the South East. Through its partnership with group insurance firm Scottish Widows, Lloyds has delivered “meaningful development for the UK economy, especially in the residential sector”, McDougall notes. This includes the £200 million funding provided to The PRS REIT to finance 1,380 build-to-rent homes in the North West, Midlands and South Yorkshire.

Under its Green Lending Initiative, the bank has supported significant refinancing agreements over the past year, including a £50 million package for Manchester Science Partnerships. Although the £1 billion initially allocated to the programme is almost deployed, the bank can also lend through its wider £2 billion Clean Growth Finance Scheme. “When we get to the end of the £1 billion initiative, we will have more headroom for green lending,” McDougall says.

HSBC

• Senior lender, bridging, capital markets, corporate lender
• Active across Europe
• $4.5bn net increase in loan book in 2017
• c.$26bn loan book (end-2017)

While the UK commercial banks tend to stick largely to their domestic market, HSBC – which has an extensive global network – remains a genuinely pan-European player. In January, for example, the bank was the sole lender of a €635 million loan to finance a portfolio of Polish retail assets for a consortium of investors. The deal included the back-to-back sale of around 35 percent of the portfolio and the subsequent financing of the end buyer.

Other European deals included two cinema portfolio acquisitions in Germany for a private equity fund, totalling €200 million.

Although it is a large-scale provider of senior debt, the bank’s infrastructure and real estate group, together with its corporate and commercial banking real estate teams, has also been an active player in the capital markets in the past 12 months.

The bank acted as joint lead manager in two guaranteed bond issuances of £300 million each for Liberty Living and financed Brookfield’s student accommodation business with a £215 million senior secured bond issuance and £65 million of mezzanine notes.

The commercial banking real estate business in the UK, Europe and Middle East is led by Andy Armstrong, while Steve Willingham is global co-head of the infrastructure and real estate finance business.

ROYAL BANK OF SCOTLAND

• Senior lender, small allocation to higher-yielding lending
• Active in the UK
• £6bn new lending in 2017
• £3bn new lending in H1 2018
• c.£25bn loan book

Since the global financial crisis, when real estate lending played a major role in the near collapse of Royal Bank of Scotland, the bank has dramatically reduced its exposure to real estate. In 2008, the bank’s property lending portfolio stood at £100 billion; today it is around £25 billion.

RBS, which remains 71 percent taxpayer-owned, is one of the largest lenders to the UK real estate sector. Business is heavily weighted towards senior lending, although 2 percent of the book is reserved for non-senior lending.

Last year, the bank provided around £6 billion of commercial property debt, a level Phil Hooper – head of the real estate business – expects to be typical of future annual
lending volumes as the bank counters loan repayments on an ongoing basis.

“We’re comfortable with the size of the business,” Hooper told Real Estate Capital in an interview in May. “The strategic ambition is to maintain our position in the market,” he added.

Hooper – a veteran of the organisation – took the reins of the property lending business at RBS and subsidiary NatWest after the departure of Paul Coates, who had led it since 2008.

In the past 12 months, key deals concluded by RBS have included a £108.9 million development facility to Select Property Group for the Affinity Living build-to-rent residential scheme at Circle Square in Manchester. The bank is also a prominent provider of unsecured facilities, including to Unite Group, Tritax and Telford Homes this year.

THE GERMAN BANKS

AAREAL BANK

• Senior lender
• Active in Germany and most of Europe
• €8.8bn new lending in 2017
• €4.2bn new lending in H1 2018
• €25.3bn loan book

Across 2017, Aareal wrote €8.8 billion of new loans. While down on 2016’s figure of €9.2 billion, this exceeded the corridor target of €7 billion to €8 billion set by the German lender for this year in light of fierce competition and market uncertainty.

During the first half of 2018, Aareal’s structured property financing segment originated €4.2 billion, up on progress made during the same period last year (€3.8 billion). The second quarter alone yielded new business totalling €2.7 billion. The group’s average gross margin on initial lending for H1 2018 stood at 210 basis points.

Reflecting an increasingly wider interest in the European logistics sector, which has been subject to a large number of financing deals of late, Aareal recently provided US private equity firm Apollo Global Management with a five-year debt facility of up to €800 million to finance a pan-European portfolio of logistics properties.

Other notable deals this year included the £150 million financing of the Cannon Bridge House office building in London and the Naropa office complex in Issy Les Moulineaux, France for €136 million.

“We have focused on further using our USPs to support our clients in their projects around the globe,” explains Christof Winkelmann, member of the bank’s management board. “As can be seen from the deals we have closed to date, we provide a wide range of lending products on our three continents, starting with single-asset financings up to highly complex cross-border transactions, customised to our clients’ expectations and timelines.”

This year has also seen Aareal “successfully enter the student housing market with two transactions in the UK”, reveals Winkelmann, without disclosing further information on the deals.

BAYERN LB

• Senior, development lender
• Active in Germany, the UK, France, Benelux, Italy, Spain, Central and Eastern Europe, the Nordics
• €4.8bn new lending in 2017
• €2.4bn new lending in H1 2018
• €20bn loan book

Bayern LB, the Munich-based bank which is majority-owned by the state of Bavaria, became, in 2010, the first of the German banks bailed out by the state to return to profitability.In recent years, it has rebuilt its presence in the real estate lending space.

During 2017, the bank provided €4.8 billion of new European commercial real estate lending, including large-scale residential property loans, excluding loan extensions. It is aiming for a similar volume this year and provided almost €2.4 billion in the first half of the year.

“In the last four years, we have consistently lent between €4 billion and €5 billion,” explains Oliver Sill, senior director in the real estate division. “Taking into account loan repayments and extraordinary repayments as a result of property sales, we grow the loan book by around €1 billion to €2 billion per year.”

Deals during the past 12 months have included a €120 million financing of an office tower in Munich, which was partly syndicated to German savings banks. The bank also provided a €90 million loan to finance a logistics portfolio for an insurance company in its domestic market and €90 million to finance the purchase of a plot of land in Munich, earmarked for a large residential development.

As well as its home market, Bayern LB lends in most European regions, including the Nordics, Benelux and Southern Europe. Last year’s deals included the financing of retail properties in Spain for a German fund manager, with a €135 million facility. In H1 2018, it also made its post-crisis return to the US with a €61 million loan.

BERLIN HYP

• Senior, whole loan and development lender
• Active in Germany, France, the Netherlands and Poland
• €8.1bn of new lending in 2017
• €3.5bn of new lending in H1 2018
• €21bn loan book

Berlin Hyp, which achieved a record year’s lending in 2017, has remained wedded to its core markets; Germany, France, the Netherlands and Poland. Unlike some domestic competitors, it has not chased expansion in the UK or the US.

Last year’s business was around 70 percent weighted towards Germany. “More than €8 billion of lending in the markets we focus on is a significant volume,” comments Assem El Alami, head of real estate finance, noting 2016’s total was €6 billion.

The 2017 total is unlikely to be matched in 2018, says El Alami, explaining: “I would expect our production to be in line with the trend in the German investment market, so down slightly from last year.”

He adds: “One reason I expect this year’s numbers to be lower is that we are getting more selective on risk and pricing. We’d rather have decent profitability on our portfolio than fight for a deal to the last basis point. Also, we are not prepared to compromise on risk; we want a portfolio we can manage in a downturn.”

Berlin Hyp’s new business in 2017 included 76 percent with investment clients, 21 percent with developers and 3 percent with housing societies.

The standout deals over the past year included a €500 million, 10-year loan to Vonovia to refinance 270 mainly residential properties in Germany, closing in January. In Poland, it provided €205 million alongside Erste Bank for a Warsaw office portfolio for Immofinanz last December.

In the Dutch market, Berlin Hyp provided a €115 million loan in April to MT PropCo to finance the Maas Tower in Rotterdam. In July, it provided Highbrook Investors with a €135 million loan to finance the Groot Handelsgebouw, also in Rotterdam.

DEKABANK

• Senior lender
• Active in Germany, France, UK, Italy, Ireland
• €3.4bn new lending in 2017
• €1.3bn new lending in H1 2018
• €8.4bn loan book

New lending levels at DekaBank, forecast to reach €3.2 billion in 2018, will be slightly down compared with the €3.4 billion generated last year.

Although the bank is “eager” to grow its loan book, real estate markets are at the top of the cycle and DekaBank has opted to be cautious and selective when it comes to financing, says Anni Hönicke, the bank’s global head of real estate lending.

The German bank has shown faith in the UK market, despite the impending withdrawal of the UK from the EU. “We are monitoring Brexit but, when we look at real estate, the market fundamentals are positive,” Hönicke notes.

In April, DekaBank transformed its representative office in London into a branch, with the aim to increase new lending activity to £800 million per year.

Two months later, the bank announced a £204.6 million loan to finance the purchase of the 20 Old Bailey office building in the City of London for South Korean buyer Mirae Asset Global Investment. The deal reflected a circa 60 percent loan-to-value ratio, with a margin below 140 basis points, Real Estate Capital understands.

“We can accommodate big tickets, of up to €300 million,” Hönicke says, adding: “We are a pure senior lender, focused on niche conservative lending against top office buildings, dominant shopping centres, brand-new logistics and hotels.”

DekaBank is also planning to upgrade its representative office in Paris into a branch by early 2019. “Although the French market is very competitive when it comes to margins, we have a long-term view and want to be more visible and active in France,” Hönicke notes.

DEUTSCHE BANK

• All types of lending
• Active across Europe
• €2.8bn lending in 2017 (including NPL investing)
• c.€3bn lending in H1 2018
• Loan book size undisclosed

The odd-one-out in this list of German banks, Deutsche Bank more naturally competes with fellow investment banks, typically parented in the US. Deutsche Bank’s European real estate lending business is based in the City of London, also setting it aside from its German peers. The starkest difference between Deutsche and most German bank real estate financing units, however, is the type of business it does.

In 2018 to date, the bank has completed around €3 billion of lending across around 30 transactions varying significantly in tone. Deals have included a low-leverage facility to finance a Park Lane hotel in London, an office refurbishment in the City of London, a ground-up development financing in Ireland and a shopping centre financing in Italy. Deals so far this year have been completed in the UK, Ireland, France, Spain, Italy, Portugal and Denmark.

“Our model allows us to do more than most, we are dynamic and diversified in terms of where and with whom we can do business,” says Roman Kogan, outgoing head of the European business – who is due to relocate to New York, after which Dino Paparelli will take the reins in London. “We have a healthy balance sheet and the bank wants to do more lending activity. Our cost of capital works for it and we want to maintain a diversified portfolio,” Kogan adds.

The bank’s deals since the last Top 40 edition have included a sizeable participation in the ‘Neptune’ financing of Blackstone and Santander’s JV to purchase the former Banco Popular Spanish portfolio. Overall, a €7 billion financing was completed, of which Deutsche Bank took an unspecified participation.

DEUTSCHE HYPO

• Senior, whole loan, development lender
• Active in Germany, UK, France, Benelux, Spain, Poland
• €3.8bn new lending in 2017
• €1.4bn new lending H1 2018
• €12.1bn loan book (June 2018)

Among the most important strategic developments across Deutsche Hypo’s real estate lending business in the past 12 months was the late-2017 opening of an office in Madrid, from which the German lender will provide finance in the Spanish market, although it is yet to close a deal at this stage.

The bank exited Spain in 2013 but sees now as the time to resume operations. “The Spanish economy has gained pace again. And our clients are again interested in investing in this market,” Sabine Barthauer, member of the board of managing directors at Deutsche Hypo, told Real Estate Capital last October.

Most of Deutsche Hypo’s known deals since October 2017 took place in the German market. The bank provided €44 million to the Essen Group to finance the Phönixhof retail park in Hamburg and wrote loans, both described as in the “mid-double digits” for a logistics centre in Hanover for BAUM Logistik Immobilien and ‘The Oval’ office scheme in Düsseldorf for Germany’s Gerchgroup. In the Polish market, Deutsche Hypo provided an €81 million financing to the owner of the Galeria Baltycka shopping centre
in Gdansk.

HELABA

• Senior, development lender
• Active in North West and Central Europe
• €8.7bn new lending in 2017
• €3.7bn new lending in H1 2018
• €34bn loan book

In the first half of 2018, the Pfandbrief bank’s new medium- and long-term real estate lending business contracted by 12 percent, year on year, to €3.7 billion.

While this volume was below the pro rata forecast for H1, this year has been notable for the group’s ongoing faith in the UK real estate market, in which its lending totalled €470 million – a year-on-year increase of 81.6 percent.

In July came the announcement that Helaba had financed the €90.75 million acquisition of the Relay Building in Central London with a five-year loan worth €61.7 million. The facility was provided to support the purchase of the mixed-use tower – home to the likes of Blockchain – by affiliates of Harbor Group International, alongside affiliates of joint-venture partner ZC Ronogil. The deal followed a similar five-year facility for another office purchase in the UK capital by Harbor in November 2017 – on that occasion 8 Bouverie Street, the loan amounting to €34.4 million.

The bank has also been active in its home market. In September, it was announced that it was financing the construction of ‘ONE’, a new 48-floor landmark skyscraper in Frankfurt, for €250 million. “These are the big landmark deals through which we are very much making a statement,” says Norbert Kellner, Helaba’s head of debt capital markets.

In its 2017 results, the bank said €8.3 billion was budgeted for this year’s real estate business. “The start of this year was a slow one, but we had a very good second quarter,” says Kellner. “So, while we are a bit behind schedule, we are very confident that we should be able to meet our plans for the rest of this year.”

LBBW

• Senior, whole loan, development lender
• Active in Germany, UK, Western Europe
• €6.3bn new lending in 2017
• €3.7bn new lending in H1 2018
• €24.6bn loan book

Stuttgart-based bank LBBW wrote €3.7 billion of new commercial real estate loans in the first half of 2018, compared with €3.4 billion during the same period last year, putting it on target to outperform last year’s total lending of €6.3 billion.

While the real estate and project finance segment delivered a lower profit before tax for the group of €104 million – a year-on-year fall of 21.8 percent – the bank put it down to high non-recurring income in 2017 from extraordinary loan repayments.

The group has been busy restructuring its property lending business, to combine it with project finance within a real assets platform. In February, Patrick Walcher, a longstanding member of LBBW’s property business, became the global head of real estate.

“We’ve had a successful start to the year,” explains Walcher. “While I wouldn’t say there has been any one exceptional deal, it’s been more of a constant deal flow from mid-sized to larger loans in all of our core markets.”

This was exemplified by news in April that the bank had a written a loan to the tune of €343 million to finance the high street retail fund of Germany’s largest pension fund Bayerische Versorgungskammer; a vehicle managed by Frankfurt-based property fund manager Corestate. The 10-year debt facility has a fixed interest rate.

According to Walcher, LBBW’s strategy has remained largely unchanged over the past 12 months, with the senior mortgage lender’s focus still trained predominantly on the asset classes of office, retail, residential and logistics. The one thing that has changed, however, is the group has intensified its business initiatives in France.

“We have just started in France,” he says. “We’ve participated in an office loan in Paris, worked on some transactions for German open-ended funds and have also been bidding for several other bilateral loans.”

PBB DEUTSCHE PFANDBRIEFBANK

• Senior, development lender
• Active in Germany, UK, France, CEE, Nordics, Spain, Benelux
• €10.7bn new lending in 2017
• €3.8bn new lending in H1 2018
• €27.5bn loan book

Pbb Deutsche Pfandbriefbank achieved record new lending volumes in 2017, with Q4 being its strongest quarter ever, with €3.8 billion worth of fresh business.

The bank achieved the same volume of new lending in H1 2018, although this represented a 24 percent decrease year-on-year. The drop is linked to the bank’s “selective stance” in financing markets amid “strong” competition, it said.

Pbb’s cautious approach has particularly been noted in the UK, following the country’s decision to leave the EU. Fresh business in the UK dropped to 10 percent of lending in the first half of 2018, from 13 percent reported at the end of 2017, and 18 percent in 2016.

Still, the UK remains a core market for pbb, with notable transactions such as the £147 million loan provided to Prologis UK Logistics Venture, to finance a portfolio of logistics facilities across the country.

 

The other European banks and the North American banks will follow on 2 October, with the non-bank lenders on 3 October.