For the second consecutive year, syndicated commercial real estate loan volumes in the EMEA region decreased during 2017, owing to a reduction in big-ticket deals suitable for participation by several lenders.
The volume of loans written in the syndication market during the year totalled €40.6 billion, down 15 percent on the previous year, according to the latest figures published by data provider Dealogic. The number of syndicated deals dropped from 201 in 2016 to just 185.
There was a notable decrease in the UK market, where volumes fell from €11.8 billion to €9.1 billion year-on-year, with the number of deals dropping by 16 percent.
“Real estate players were still quite concerned over Brexit last year. Even with sterling down, equity buyers were cautious and we saw fewer big assets changing hands,” Jean-Maurice Elkouby, head of ING Real Estate Syndicated Finance, tells Real Estate Capital.
“With fewer refinancings and the opportunistic part of the market slow, the syndication market has been affected. However, I think the mood [in the UK] is now changing,” he adds, noting that syndication could have also been impacted by the fact the property cycle is in an advanced stage, with “high” valuations across Europe.
Although syndicated volumes dropped in 2017, the fall in activity was not as severe as in 2016, when syndicated loan volumes fell by almost 40 percent, to €48.6 billion from €79.1 billion in 2015.
Sources note that banks focused on smaller-ticket financings in the first half of 2017, with average deal volumes not large enough to warrant syndication. An additional factor impeding syndication across the region was the significant amount of bilateral transactions taking place, which did not require distribution through the syndication market.
Last year was also marked by an increase in investments funded through equity, with a limited degree of leverage applied. The UK market was a case in point, with lending volumes down by almost a quarter during the first half of 2017 as lenders struggled to keep pace amid an equity-driven investment market, according to De Montfort University.
The UK’s largest single office investment deal highlighted this – Hong Kong food conglomerate Lee Kum Kee’s purchase of the ‘Walkie Talkie’ skyscraper in London for £1.28 billion (€1.44 billion) last July was not included in Dealogic’s tables, which suggests no syndicated loan was issued at the time of acquisition.
In France, on the other hand, syndicated volumes increased by 37 percent year-on-year to €9.8 billion. The French market now holds a 24.2 percent share of EMEA’s total loan syndication volumes. The election of pro-business centrist Emmanuel Macron to lead the country could have played a role in boosting syndicated volumes, Elkouby says. “Following the election of Macron, confidence was back in France perhaps for the first time since the crisis.”
French bank Natixis topped the league table as the most active bookrunner across EMEA, with €3.4 billion completed across 25 deals. It was followed by French peer Crédit Agricole CIB, which closed €2.5 billion in syndicated deals. ING also played an important role with €2 billion, along with Italy’s UniCredit, with volumes just below €2 billion.
Natixis also topped the rankings of bookrunners in non-recourse loans, implying loans secured at the property level, rather than including corporate-style loans which are not secured by individual properties. In the non-recourse rankings, Natixis wrote €2.5 billion of volumes, followed by ING with almost €1.9 billion.
The largest syndicated deal of 2017 recorded by Dealogic took place in France last October, when BNP Paribas, Crédit Agricole, ING and Natixis financed the Coeur Défense office complex in Paris’s La Défense business district with a €900 million loan. The seven-year, fixed-rate loan, with a 50 percent loan-to-value, was syndicated to a pool of French and German banks.
Dealogic’s league tables also specified the volume of syndicated lending which was non-recourse – 132 deals, equating to €26.8 billion of volume and accounting for 66 percent of the overall syndicated market in the EMEA region.