Borrowers in Europe’s commercial real estate market are increasingly demanding finance that fits with their environmental, social and governance agenda. A facility provided this month by five banks demonstrates how lenders are responding. Here, we explain why that deal – and four other February transactions – should be on your radar.
1. GPE’s ESG-linked revolver: On 6 February, UK real estate investment trust Great Portland Estates announced a £450 million (€527 million) unsecured revolving credit facility with five banks – Santander, NatWest, Wells Fargo, Lloyds Bank and Bank of China. GPE said the facility, priced at 90 basis points for a term of five years with a two-year extension option, was the first such ESG-linked facility by a UK real estate investment trust. Under the terms of the deal, a margin decrease, or increase, of up to 2.5 basis points will be applied based on whether GPE meets annual sustainability targets across three key performance indicators. The deal is the latest example of real estate finance terms being pegged to ESG criteria.
2. Barings’ German development deal: This month, alternative lender Barings, a subsidiary of US insurer MassMutual, announced that it had lent €240.3 million of floating rate, senior construction finance to German developer Mikare Group to support the construction of Upside Berlin, a residential-led scheme in the German capital. For Barings, the deal represents a significant expansion of its real estate debt programme into continental Europe. For other non-bank lenders, it demonstrates there are lending opportunities in the heavily banked German market.
3. The Collective’s co-living financing: German bank Deutsche Bank and closed-ended investment fund GCP Asset Backed Income Fund provided a £140 million group-level financing package to The Collective – the co-living operator which, according to its website, has two properties in London and one in New York. The company believes the nascent concept – in which residents have private space and access to shared amenities – can catch on globally. The four-year financing is designed for it to acquire development sites in the UK, Germany, Ireland and the US.
4. Allianz’s Spanish shopping loan: Allianz Real Estate, the property business of German insurer Allianz, is in the process of diversifying its European lending book. This month, it announced a €180 million loan to German real estate company ECE’s European Prime Shopping Centre Fund II to finance the €290 million acquisition of a shopping mall in Asturias, Spain, from retail landlord Intu Properties and Canada Pension Plan Investment Board. The property was sold as part of Intu’s stated strategy of fixing its balance sheet. The financing deal demonstrates that, when prime European retail assets come to the market, lenders are willing to provide finance.
5. Intu’s conditional debt deal: Sticking with Intu, the retail REIT announced on 26 February it had agreed terms for an amendment and extension of its revolving credit facility to 2024. The £440 million facility would replace an existing £600 million RCF due to expire in October 2021. However, the deal is conditional on Intu raising £1.3 billion of equity – on which the company said it is working with its corporate brokers. Intu’s attempts to refinance highlight the struggles faced by owners of retail, but the provisional debt deal suggests certain lenders at least can envisage a future for prime shopping centre portfolios.
Each Monday, we publish our updated database of European real estate lending deals. If you are a subscriber, you can access our Lending Data here.
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