In case you missed it, we are publishing the 2020 edition of our flagship Europe’s Top 40 Lenders list in four parts this week. If you have not done so already, check out the first part here, from where you will find links to the rest.
One thing became abundantly clear as we were compiling it: this year has been tough for most of the market’s debt providers. Most have clearly spent much of 2020 managing their exposure to Europe’s property sector.
Yet some alternative lenders saw the covid-19 crisis as an opportunity to grow their business, and lenders of all types have closed deals since the onset of the pandemic, albeit selectively. Activity was reduced significantly, but the industry’s lights remained on.
Here are some observations and conclusions from compiling the list:
The numbers were down – a lot: Our editorial team selects the top 40 based on compelling evidence of activity. This is not a straightforward ranking, although lending volume data help us to make our choices. Some of the big investment banks declined to disclose those figures but made the list due to evidence of individual transactions.
The 33 that did provide figures reported a collective €35 billion of lending in 2020 to the end of Q3. It is not a like-for-like comparison, but 35 of those in the list had reported doing €84.7 billion in the whole of 2019. From this, it becomes clear that this year’s European property lending volumes will be down sharply. The €35 billion also includes much refinancing of existing loans. But although reported volumes are down, they still represent a reasonable amount of lending given the backdrop of a pandemic and an unprecedented halt to real estate investment.
Uncertainty in the syndication market clipped investment banks’ wings: As in previous years, the big plays by private real estate investors tended to be backed by North American investment banks. There were some examples of such deals in 2020 – the multi-bank financing of Blackstone’s purchase of iQ Student Accommodation in April, for instance – but far fewer than in 2019. As well as a reduction in dealflow, the absence of a predictable loan distribution market for part of the year meant the investment banks were reluctant to take underwriting risk. That said, commercial mortgage-backed securities issuance resumed in July, and some banks used securitisation to get big financing deals done.
Commercial banks were quieter: In our 2020 list, banks occupy 16 spots, compared with 22 in the 2019 edition. This time round, fewer of the commercial banks were willing to divulge information on their activities. But that does not mean banks were out of the game. Some of the French and German lenders we featured reported significant volumes. It is likely that many of the commercial banks have focused on existing clients in 2020, with much activity in the refinancing of existing loan positions. But the list shows commercial banks are still important providers of liquidity in European property markets.
There was plenty of new blood in the list: Nine organisations featured in the 2020 edition that did not appear in 2019. This is the biggest shake-up in the list in recent years and is hardly surprising, given the dislocation in the lending market. Some of the new entrants are organisations that launched real estate debt strategies in recent years. Not having a legacy loan book to deal with, while being presented with a less competitive lending market, appeared to be a good combination of circumstances for some.
Although some showed evidence of using this crisis to grow their businesses, non-bank lenders did not universally run riot in 2020. Some have clearly played a careful game with the dry powder at their disposal. It will be fascinating to see how the 2021 list shapes up as greater liquidity returns to the sector as covid vaccines are rolled out.