It’s what you’ve all been waiting for. Below, we reveal the winners of the Real Estate Capital awards, celebrating the best of the European real estate finance industry in 2018.
Last year was a competitive one in the real estate debt space, reflected by the fact several of our key awards have changed hands since 2017. We have new victors in our key bank and senior debt fund lender categories, for instance. That said, some stalwarts of the industry have retained their titles, demonstrating their staying power in an evolving marketplace.
Winners can rest assured they were voted for by their peers in the industry. Our awards are totally independent – with no sponsorship or panel of judges, the industry decides the winner in each category.
To the winners, congratulations. To those who missed out, better luck next year. Without further ado, we hope you enjoy discovering who were the leading lights of European real estate finance in 2018.
Bank lender of the year
Winner: Deutsche Bank
Runner up: Bank of America Merrill Lynch
Deutsche Bank provided nearly €4 billion across 35 financings in 2018 – a 50 percent increase over 2017 that has reinforced its reputation as one of the most dynamic real estate lenders in Europe.
The strategy has always been to “stay broad, stay across markets”, not targeting specific real estate sectors so much as supporting its clients’ financing requirements, says Roman Kogan, who was head of CRE financing for EMEA before becoming head of US commercial real estate loan origination at the end of 2018. “While doing so we’re hoping to build as good, diverse and safe a portfolio as possible that generates a good return for an acceptable amount of risk for the bank,” he adds.
The net result last year was a huge range of transactions, including a Portuguese hotel, Nordics residential, Spanish non-performing loans, an Irish office development and several London office refurbishments.
Dino Paparelli worked closely with Kogan for several months in what was a seamless transition before taking over the European job. Kogan also stresses the strength of the team as a whole – one of the longest-established in the sector – and one reason why Blackstone gave Deutsche Bank the mandate for its first agented CMBS deal in Europe – a refinancing of Italian retail assets in February.
Though the late property cycle is a concern, Kogan is confident the bank’s momentum in EMEA will continue through 2019. “Perhaps a correction is coming but people feel comfortable on the lending side – the real estate that has been financed is not over-leveraged – and opportunities are still out there,” he says.
Insurance company lender of the year
Winner: Allianz Real Estate
Runner up: Aviva Investors Real Estate Finance
Both in strategy and by geography, 2018 was a year of diversification for Allianz Real Estate. In addition to core, fixed-rate senior loans, the insurer introduced origination of ‘enhanced’ lending to clients, backing prime properties with a value-add element to them.
“Enhanced opportunities provide a good add-on to our core strategy because the letting market is still relatively strong in the main European markets so build- or manage-to-core is still a sound strategy,” says Roland Fuchs, head of European real estate finance.
Deals with a ‘value-add’ profile included a £50 million (€57 million) participation in a £100 million development financing of Partners Group’s 80 Fenchurch Street London office scheme in April and its August financing of the St Katharine Docks estate for Blackstone, in which it provided the senior element of a circa £300 million financing, with an element of letting risk. The deals also highlighted the group’s increasing focus on London.
Allianz also established a centralised debt fund, designed to accommodate growing demand from in-house companies seeking to increase their exposure to real estate debt. Since its launch, the fund has deployed capital of more than €1 billion across the UK, Ireland, Italy, Spain and Sweden, with total European debt investment volumes exceeding €2 billion in 2018.
Last year’s deals included the financing of a €316 million Dublin office and residential portfolio; the €135 million mixed-use Caleido development in Madrid; and a €150 million refinancing of Gränbystaden Galleria shopping centre in Uppsala, Sweden. This year will see the centralised debt fund opened to third-party institutional investors as Allianz continues to scale its European debt business.
Senior debt fund lender of the year
Winner: Laxfield Capital
Runner up: AXA Investment Managers – Real Assets
Laxfield Capital has tapped a rich vein of demand from borrowers across real estate with a debt fund that sits squarely in what the firm calls the “missing middle” between bank lending and higher-yielding platforms.
London-based Laxfield launched its £500 million (€554 million) senior real estate debt fund in January 2018 but such was the strength of deployment that barely nine months later it was upsized to £750 million. Today, the fund, known as Laxfield LLP, has made around £500 million of committed loans while terms have been agreed on a further £150 million of new lending.
Though the fund can go to 75 percent loan-to-value, most loans have been written at 60-65 percent LTV on a wide spread of underlying assets that goes beyond traditional core real estate – from central London serviced apartments to mixed-use investments and hotels.
Chris McMain, Laxfield LLP’s head of investments, believes the fund is reflecting structural changes in how real estate works. “Serviced offices, operational assets, student housing and hotels are all becoming more institutionally acceptable,” he says. “The more these properties become mainstream, the more they’ll need to become mainstream for lenders. There’s no point thinking about the halcyon days of 10 years ago when everyone used to sign 10-year leases. The opportunity today is to be a bit more creative and take a practical approach to risk.
“We’re optimistic. We take the view that dislocation leads to opportunity for those with capital to deploy and a through-the-cycle view.”
High-yield debt fund lender of the year
Winner: Blackstone Real Estate Debt Strategies
Runner up: DRC Capital
Blackstone Real Estate Debt Strategies (BREDS) stuck to its high-yield strategy in 2018; providing whole loans, mezzanine, preferred equity and acquiring first loss loan positions from banks.
Blackstone’s real estate debt investment business committed more than $2.5 billion in Europe across 13 deals last year, including a €323 million whole loan financing of Dedica Anthology, a southern European hotel portfolio and a £185 million (€211 million) mezzanine loan facility secured by a UK short-stay leisure portfolio.
“The general trend in 2018 was towards providing modest leverage to well capitalised sponsors that required flexibility on transitional or operational assets,” recalls Michael Zerda, head of Europe for BREDS.
The past year saw growth in whole loan lending, with £1.3 billion of loans written for Blackstone’s mortgage REIT, which finances its loans to achieve high-yield returns. The growth in this business is partially a result of the group being able to source more efficient loan financing in Europe, which has driven down its cost of capital.
“It’s hard to tell apart the recent business we’ve been writing from a typical bank loan in terms of leverage [60-70 percent loan-to-cost]. The reason people continue to come back for finance is owing to speed and flexibility,” Zerda says.
In April last year, BREDS provided a £90.8 million transitional senior loan to Seaforth Land for the acquisition of CAA House in London’s Covent Garden. It is also extending financing towards the refurbishment of the property.
Sustainable finance provider of the year
Winner: Lloyds Bank Commercial Banking
Runner up: ING Real Estate Finance
Speaking to Real Estate Capital in November, Madeleine McDougall, Lloyds’ global head of commercial real estate, revealed the group was on the cusp of allocating the full £1 billion (€1.2 billion) set aside in 2016 for its Green Lending Initiative.
The scheme is designed to subsidise loan margin discounts of up to 20 basis points for borrowers who cleave to energy efficiency targets on the commercial properties underlying the loans. The implementation of its sustainable lending initiative has led to Lloyds winning our inaugural sustainable financing provider award.
Under the initiative, Lloyds provided a £50 million package last year to Manchester Science Partnerships, a technology and science park operator, in exchange for a pledge from MSP to allocate £600,000 worth of sustainable improvements to the property, reduce the annual energy intensity of its assets by 3.5 percent and increase the amount of energy its buildings use from renewable sources by a further 10 percent.
In April, the group provided a loan to the Ethical Property Company to the tune of £27 million – also under the Green Lending Initiative. Part of the loan will fund the development of a London office building – The Green House – aimed towards social businesses, charities and not-for-profit organisations.
“Our Green Lending Initiative remains the only scheme of its kind in the UK market by allowing borrowers to use the financing as they see fit, providing they hit the key performance indicators agreed in the covenants, rather than other green or sustainable loans that must be tied to spending on specific ESG projects,” says McDougall.
In May, the lender also launched its £2 billion Clean Growth Finance scheme, offering discounted finance to clients committed to investing in low-carbon projects.
Syndication team of the year
Winner: Bank of America Merrill Lynch
Runner up: ING Real Estate Finance
Bank of America Merrill Lynch is understood to have sold down more than $3.5 billion of commercial real estate debt in the EMEA region in 2018 and achieved an impressive 25 percent growth in loan origination volumes over the previous year.
The growth in volumes was notable for the breadth of the investment bank’s lending, from bridge loans and UK hospitality deals to a senior/mezzanine structure in Finland and a pan-European whole loan. “We saw growth across the board, both in terms of jurisdictions and asset classes,” says Matthias Baltes, who heads the bank’s commercial real estate finance unit in London.
At the heart of its success last year was CMBS issuance and the direct syndication of loans – both “crucial to our business”.
The US bank made the most of the upturn in European CMBS activity in 2018, although Baltes says market conditions toughened in the final quarter as credit spreads moved out. “We are back to an environment where the loan product is likely to be more competitive in principle. On that basis I would expect greater usage of loan syndication directly rather than repackaging them into securities.”
Although Baltes acknowledges concerns over prime property pricing and risk at this late point in the cycle, he draws comfort from the fact that debt is less exposed than equity while “leverage is much more prudent” than 10 years ago.
But he adds: “We take it a deal at a time; we always do.”
Lender of the year in the UK and Ireland
Winner: Lloyds Bank Commercial Banking
Runner up: Nuveen Real Estate
Although the UK’s commercial banks have reined in their real estate lending activity since the financial crisis, Lloyds has proven itself eager to provide debt across the UK’s property sector through several lending products.
In January, it played a key role in a £247 million (€282 million) funding deal for the UK’s private rented residential sector, backing Select Property Group’s scheme at Circle Square, Manchester. The bank also provided portfolio financing during the year. In August, it provided £230 million of debt to back US real estate investment trust Global Net Lease’s complete 43-strong UK office portfolio.
In recent years, landmark new developments in London have been of interest to Lloyds, with 2018 being no exception. It wrote a three-year, £82 million loan to developer Ballymore, to finance a new office building in the UK capital’s Nine Elms district. Other development loans have been provided in Birmingham and Scotland. Several UK financings were completed under the bank’s green lending initiative, for which it is recognised in our sustainable lending category.
Through its collaboration with in-house insurance firm Scottish Widows, Lloyds further established itself as a provider of long-dated debt during the year. A £75 million loan in December to LXi REIT brought the total provided through the partnership to more than £500 million in 2018, and more than £1 billion since the tie-up was launched in 2016.
“The product plays a unique role in the marketplace by allowing our clients to access longer-dated debt through the relationship teams they have already forged lasting partnerships with,” the bank’s head of commercial real estate, Madeleine McDougall, said in December.
Lender of the year in Germany
Winner: pbb Deutsche Pfandbriefbank
Runner up: ING Real Estate Finance
Commercial real estate finance accounted for all but €400 million of pbb Deutsche Pfandbriefbank’s €5.9 billion of new lending in the first nine months of 2018.
Germany was pbb’s biggest market, equating to around €2.5 billion, 45 percent of new lending in the first nine months. In terms of property type, the main focus of new business was on offices, notably its loan to GEG German Estate Group for the €250 million purchase and refurbishment of Global Tower, Commerzbank’s former headquarters in Frankfurt. Other key deals included €91 million of construction finance for the Neue Balan office and retail scheme in Munich and a €157 million development financing of a Frankfurt hotel and office tower.
Overall, pbb’s Q1-3 2018 lending was 15 percent down on the same period in 2017. Even allowing for the usual final-quarter flurry of activity, annual volume is expected to be at the lower end of its projected €10 billion-€11 billion range – against €11.6 billion for 2017 – when pbb posts its full-year results in March.
The bank has acknowledged “growing competition” among lenders in its domestic market, which also hit its margins on new business: 160 basis points against 165bps in 2017. In addition, it is adopting a “conservative approach” to risk. In effect, pbb’s numbers reflect the conundrum for German banks supporting their domestic market. Despite concerns over pricing of core assets, Germany remained a safe haven for investors compared with the rest of Europe, and the pressure on cap rates continued.
The bank believes competition will get tougher in 2019, but at this point in the cycle, the bank’s cautious approach to risk looks prudent.
Lender of the year in France
Winner: Société Générale
Runner up: Allianz Real Estate
Last year saw Société Générale reinforce its position as an active lender in its home market. In July, the group acted as a co-ordinator and facility agent on a €1.2 billion green revolving credit facility provided to Paris-headquartered hospitality group AccorHotels by a consortium of 15 banks. Serving as testament to the growing appeal of the French luxury hotel sector for both investors and lenders, October saw SocGen give its backing to Henderson Park’s purchase of the Westin Paris-Vendôme, one of the capital’s most iconic buildings. The deal came in the shape of a €300 million senior loan, provided alongside Crédit Agricole.
The bank also played a key role in the first post-crisis commercial mortgage-backed securities transaction to feature significant exposure to French commercial real estate. In November, alongside Deutsche Bank, it issued Arrow CMBS 2018, which securitised 95 percent of a €308.2 million loan backed by logistics and also included some German and Dutch collateral.
In a joint note sent to Real Estate Capital, co-global heads of real estate structured finance at the group’s corporate and investment banking division Jerome Gatipon-Bachette and Arnaud De-Jaegere credited a “client-based approach” for 2018’s landmark transactions.
“For institutional sponsors looking for core investment opportunities or more opportunistic investors focusing on value-add situations, SG CIB has been creating more bespoke solutions for its clients to help them successfully reach their objectives,” they said.
“In addition to its global relationship with banking lenders, SG CIB has also developed deeper relations with non-bank lenders allowing to offer best price and execution for sizeable transactions.”
Lender of the year in Southern Europe
Runner up: Deutsche Bank
Spain’s domestic banks have kept a low profile for much of this real estate cycle, given most have been busy deleveraging defaulted loans provided pre-crisis. However, with the revival in the Spanish property market’s fortunes, the banks are back – including Spain’s largest lender, Santander.
In April, the group headed up a consortium of lenders providing a €225 million refinancing of the Puerto Venecia shopping centre in Zaragoza, Spain. The recipient was UK-based shopping centre investor and developer Intu Properties, which managed to renegotiate a reduction of 210 basis points on the margin of the loan compared with the existing facility from 2013.
The Spanish retail sector has proven to be particularly fertile ground for the group. In July, it was part of a syndicate – including Banco Sabadell, Liberbank and Unicaja Banco – that granted a €98.5 million facility to real estate investment trust Lar España to fund the construction of Seville’s Palmas Altas shopping centre.
Santander continued to sell off legacy loans, including the €500 million Project Indianapolis in January. Its activities at home are indicative of the increasing steps taken by Spanish banks to accelerate their deleveraging strategies. This appears to be paying dividends. According to figures from investment banking firm Evercore, the southern European region accounted for 77 percent of total volume of closed transactions for real estate on the continent in 2018 – 35 percent of which were registered in Spain.
Lender of the year in Benelux
Winner: PGIM Real Estate
Runner up: Morgan Stanley
PGIM Real Estate has had an active 18 months in the Benelux region, typically providing long-term, fixed-rate senior loans against income-producing assets.
The investment manager provided its first loan in the Dutch market in 2013, when there was very little senior debt capital available. “It mushroomed from there,” says David Gingell, executive director, responsible for debt origination in continental Europe. “We’ve got a solid base now, with excellent borrower relationships. We also work side by side with local lenders.”
PGIM teamed up with local bank ABN AMRO to make its first foray into Dutch residential financing last year, providing a €78.5 million, seven-year loan at 60 percent LTV against a portfolio of residential apartments for local asset manager, Orange Capital Partners.
“In 2018 there were a lot of transactions and people needed to move fast with certainty of execution; our transparent approval process can deliver that,” Gingell says. He notes the group’s response to investors’ move towards ‘beds and sheds’ last year. “We have typically been a lender to the office sector, but we’ve built out our capabilities,” Gingell says. In addition to a senior residential financing for Heitman, PGIM provided a €27 million loan against 12 light industrial assets in Amsterdam and Rotterdam for Urban Industrial in October.
“We see the Benelux as fertile ground in 2019. There may be more global headwinds but the Netherlands is well positioned in terms of its macroeconomic story.”
Lender of the year in the Nordics
Runner up: Citi
German bank Helaba’s upgrade of its Stockholm representative office to a fully-fledged branch last June followed more than a decade of continuous activity in the Nordic real estate markets since it entered in 2006. All real estate banking services are now realised on site, including last year’s financing of the Norwegian Railway headquarters in Oslo for a Nordic fund, with a loan in excess of NKr1 billion (€100 million).
Other deals included a €40 million loan for the purchase of a regional shopping centre, Center Syd, close to Malmö, Sweden, by Catalyst Capital. In total, Helaba issued circa €300 million of debt in 2018 to local and cross-border investors in Sweden, Finland and Norway, taking the value of its outstanding Nordic loan book to around €1.4 billion.
The bank hopes to further grow its business this year with loans in Sweden, Finland, Norway and Denmark, backed by all asset types. “With Helaba’s size and good ratings we are able to secure funding and thus provide financing in all four currencies for up to 10 years,” says Michael Kröger, head of international real estate finance.
He sees strong fundamentals across Nordic markets, which are gaining increasing attention from international investors, especially Finland. High barriers to entry, including separate currencies and local legislation, will prevent markets from being oversupplied with finance, he argues.
“Our ambition is to become first choice as international lender for Nordic CRE.”
Lender of the year in Central and Eastern Europe
Runner up: Helaba
HSBC’s sole financing of one of the largest-ever real estate portfolio trades in Poland is reason alone to warrant recognition for its activities in Central and Eastern Europe. In January, it issued a €635 million investment loan to fund the acquisition of 28 retail assets by a vehicle backed by Oaktree Capital Management and Redefine Properties. The deal included the back-to-back sale of around 35 percent of the portfolio, and subsequent financing of the end buyer, Echo Polska Properties – an existing client of the bank.
HSBC specialises in funding clients across borders; it has supported several North American pension funds and sovereign wealth funds investing into Poland and, in 2017, together with UniCredit, led a €680 million, seven-year bond issue against a Czech residential portfolio owned by Blackstone and Round Hill Capital.
Last year saw “strong demand from our core clients as they looked to invest not only in Poland and the Czech Republic, but in the wider CEE region”, notes Steve Willingham, HSBC’s co-global head of real estate and infrastructure financing.
There was a shift towards logistics assets and the bank continues to see a strong pipeline in this area, he adds.
“Occupational markets appear robust going into 2019 but global real estate valuations are high, requiring continued focus on sponsor and cashflow quality,” Willingham says.
Through its Warsaw office, HSBC will continue to focus on supporting relationship clients through a “boots on the ground approach, which is essential to underwrite risk”.
Financing deal of the year: Investment
Winner: UK railway arches (Bank of America Merrill Lynch)
Runner up: Apollo’s pan-European logistics portfolio (Aareal Bank)
One of the biggest European property deals of 2018 involved Network Rail’s £1.46 billion (€1.68 billion) sale of its railway arches portfolio to Blackstone and Telereal Trillium – and there was the same level of anticipation around its financing.
Bank of America Merrill Lynch fended off strong competition to become the sole underwriter of a £777 million, three-year term loan for the purchase of the portfolio. Behind the headline numbers there is what Matthias Baltes, head of the bank’s commercial real estate finance unit in London, describes as the “amazing granularity” of a transaction involving 5,200 assets, most of which are converted railway arches let out as workshops, offices, restaurants and shops. As Baltes says: “You need to take a holistic portfolio view.”
Though Blackstone reportedly ended up classifying the arches portfolio as core-plus, at the outset of the transaction it was undeniably hard to categorise. The fact that this was a 150-year leasehold deal rather than a freehold sale meant further complications.
Yet as Baltes points out, everyone involved in the deal could see the assets offered significant reversionary potential as there was under-renting throughout. The tenants, meanwhile, were typically serving local markets rather than a broader customer base – in other words, unlikely to suffer unduly from any Brexit fallout. “From a real estate perspective, we observed a very strong cashflow profile, which is unlikely to be disrupted,” he adds. “It was a lot of work, but the diversification and the granularity were definitely a strong draw for us.”
Financing deal of the year: Development
Winner: The Stage, London (Lloyds Bank Commercial Banking, Investec Structured Property Finance, Harel, Bank of East Asia, Bank of Communications London Branch)
Runner up: One Crown Place, London (AustralianSuper, Nuveen Real Estate)
In April, Lloyds played the role of lead arranger in the provision of a £390 million (€445 million) development loan to real estate investment company Cain International to fund The Stage, a £750 million mixed-use project in London’s Shoreditch.
Set around the remains of Shakespeare’s Curtain Theatre, Lloyds provided £97.5 million of the debt, with the loan also including £97.5 million of funding apiece from Investec and Harel, the third largest insurance group in Israel. The remainder was provided by Bank of East Asia and the London branch of China’s Bank of Communications.
The eclectic mix of lenders reflected the increasing diversity in the property debt space. The three-year loan replaced original financing supplied by Investec when the site in East London was first acquired back in 2015 and was designed to finance the ongoing construction of the scheme. The Stage is set to include more than 400 new homes, 186,000 square feet of offices in addition to 33,000 square feet of retail and leisure space.
“We’re proud to have co-ordinated and backed a significant funding agreement, which will transform this historic location into an iconic new development,” Madeleine McDougall, Lloyds’ global head of commercial real estate, said.
The deal highlighted increased lender appetite to finance development projects in the UK capital. With its mix of uses, and the backing of investor Cain, The Stage represented the type of prime project debt providers proved willing to fund last year.
Borrower finance team of the year: Fund manager
Runner up: M7 Real Estate
US private equity giant Blackstone remains the single largest borrower in European real estate. “We closed on approximately €25 billion of financings last year, more than a 20 percent increase on 2017, accessing different pools of capital more so than in the past,” says Gadi Jay, managing director within Blackstone’s real estate division.
Blackstone began investing from a new, open-ended core-plus fund in November 2017, including its purchase of Network Rail’s UK railway arches alongside Telereal Trillium in September last year, against which it borrowed £777 million (€887 million) from Bank of America Merrill Lynch. The fund is predominantly financed via corporate investment grade bonds – a source the group tapped into for the first time in 2018. The biggest deal
Blackstone secured finance for last year was the Neptune portfolio of Spanish assets and loans it acquired from Santander in 2017. Blackstone raised €7 billion of debt from Morgan Stanley, Deutsche Bank, BAML, JPMorgan and NatWest. Blackstone’s mortgage REIT bought a significant portion of the debt.
Blackstone has also been a key sponsor of Europe’s resurgent CMBS market, backing 55 percent of issuances last year. In Q1 2018, it refinanced a portfolio of four Italian retail properties via the circa €404 million Pietra Nera Uno CMBS. In Q4 it refinanced a German office building called the Squaire in a €475 million securitisation.
“We believe CMBS remains an important part of the overall financing market and will continue to support it as much as possible,” Jay says.
Borrower finance team of the year: REIT
Winner: Great Portland Estates
Runner up: Unibail-Rodamco
Great Portland Estates defied all the Brexit-induced uncertainty around London’s property market in 2018 to report buoyant leasing activity, £339 million (€387 million) of net sales and good progress on its development pipeline.
In its 31 December 2018 quarterly update, the central London REIT reported cash and undrawn committed debt facilities of £646 million – a strong financial position undoubtedly reinforced by a series of moves to reduce the cost and extend the term of its debt.
Last March, GPE raised £100 million through a US private placement following a successful tender for a legacy debenture. In October, GPE signed a £450 million unsecured revolving credit facility priced at 92.5 basis points with six existing relationship banks.
The transactions represented a show of lender support for an REIT with big exposure to London offices. The deals have also left GPE with a low marginal cost of debt of
1.7 percent and no company-level debt maturities until the initial expiry of the credit facility in October 2023.
“Our successful 2018 refinancing transactions enabled us to lower the cost and increase the flexibility of our debt book, while also improving our debt maturity profile,” says Martin Leighton, director of corporate finance. “Our conservative capital structure is fundamental to the success of our business.”
“Given the political and economic uncertainty, we expect the debt markets in 2019 to be cautious and potentially volatile, and so we consider our 2018 refinancing activities to have been well timed.”
Debt advisor of the year in the UK and Ireland
Winner: Brookland Partners
Runner up: Eastdil Secured
The bulk of the £3.5 billion (€3.99 billion) of debt transactions Brookland advised on in 2018 were large, complicated financings and restructurings – the type of business that sets the firm apart from pure debt brokers. Its investment banking services range from arranging loans and capital markets deals to non-performing loan sales, restructuring and investment advisory.
“We add value and provide increased certainty of execution by taking a hands-on approach through the whole transaction process,” says managing partner Nassar Hussain.
A deal Brookland is particularly proud of is its £250 million financing of Pinewood Studios in December 2017, which required a deep understanding of real estate, operating businesses and capital markets to structure a high-yield bond and a £50 million super senior development facility. Its biggest deal of 2018 was the £2.5 billion restructuring of BMI hospitals, which Brookland undertook on behalf of a UK government agency. It also arranged acquisition financing against One Poultry in the City of London, let to WeWork.
“A lot of banks have reached their exposure limits to WeWork; we added value by finding new sources of capital that could provide debt,” Hussain says.
Having bought out hedge fund Omni Partners’ 40 percent stake in the business last summer, Brookland’s owners intend to expand by building a larger presence in Europe, with a focus on Germany, Spain, Holland and Ireland. It will also pursue ‘flow’ business and smaller, plain vanilla transactions, in addition to larger, complex deals.
Debt advisor of the year in continental Europe
Winner: First Growth Real Estate
Runner up: Eastdil Secured
Since its inception in late 2010, First Growth Real Estate has advised on debt sourcing, arranging and restructuring transactions worth €7 billion in France, Italy, Spain, Benelux and Greece.
In 2018, the firm, which has offices in Paris, Milan and London, advised on 14 deals totalling €1.3 billion, including the €130 million loan provided by a consortium of French banks for Eurazeo’s purchase and development of the Kaufman & Broad headquarters in Paris.
It is the diversity of work as much as the deal-count that suggests First Growth is punching above its weight. Co-founders Francesca Galante and Cyril de Romance believe real estate debt advisory should extend beyond debt capital sourcing into restructuring for borrowers and, on the lender side, special servicing. “I don’t think anybody else takes this view,” says Galante.
The strategy paid dividends with First Growth’s involvement in a significant loan trade in Italy in 2018 – the culmination of three years’ work for Commerzbank. The former Eurohypo loan portfolio stood at around €1.5 billion in 2015 before First Growth restructured and wound down positions. By last year, the remaining portfolio stood at around €300 million and was sold against a turbulent political backdrop “just before the liquidity started to dry up in Italy”, says Galante.
The firm remains focused on continental Europe, which is one reason why Brexit has been good for business so far, although going forward Galante acknowledges that “visibility is a challenge” from a geopolitical perspective.
“That being said,” de Romance adds, “occupier demand is still holding strong in France and Italy.”
Loan portfolio seller of the year
Winner: UK Asset Resolution
Runner up: Bank of Cyprus
Eight years after it was set up as a ‘bad bank’ by the UK government to take on the loans of fallen lenders Northern Rock and Bradford & Bingley, 2018 saw UK Asset Resolution continue to sell off the assets it picked up during the dark days of the financial crisis.
In April, UKAR completed the sale of two separate portfolios of defunct bank Bradford and Bingley to an investor group led by Barclays for £5.3 billion (€6 billion). The sale consisted of around 45,000 housing loans, with equity funding for the acquisition coming from PIMCO.
This, in turn, enabled the full repayments of a Financial Services Compensation Scheme loan, which can be viewed as a significant milestone in the UK’s economic recovery. UKAR is believed to be on course to sell the rest of its remaining assets by 2021.
In September, the group also sold an £860 million portfolio of equity release loans to insurance company Rothesay Life, consolidating the group’s position as a major seller in the UK market.
“Our overarching objective is to dispose of assets in a way which protects and maximises value for the taxpayer,” says Mark Wouldhave, asset sales director with the agency.
According to the group’s interim results announcement, covering the six months to the end of September 2018, it made government loan repayments of £6.3 billion, bringing total repayments across the life of the agency to £44.7 billion. Its balance sheet was reduced to £13.6 billion, bringing the total reduction of assets to more than £102 billion since 2010.
Loan portfolio buyer of the year
Winner: Cerberus Capital Management
Runner up: Apollo Global Management
US private equity firm Cerberus Capital Management has been a prominent buyer of distressed real estate debt across European markets for most of this decade. In recent years, its attention has turned to southern Europe, where the bulk of its 2018 purchases took place.
The firm was the most active buyer of distressed real estate loans and properties in 2018, according to investment banking firm Evercore, which recorded its annual volume at more than €19 billion across 13 deals. From 2014 to 2018, Cerberus bought a staggering €89.9 billion of real estate loans and bank-owned properties, Evercore added.
The highlights of Cerberus’s activities in Europe in 2018 included the acquisition of approximately €10 billion of loans and real estate-owned assets from Spain’s Banco Sabadell, known as Project Coliseum and Challenger. The deal is seen by many as a major landmark of the deleveraging of Spain’s banking system.
Other notable portfolio purchases included Agora, acquired from CaixaBank for €650 million, and Apple, reported to carry a face value of €2.8 billion. Last year also saw the group successfully obtain two Irish NPL portfolios – projects Redwood and Scariff – for a combined face value of €2.5 billion.
Elsewhere, in October the group finalised its acquisition of BBVA’s Spanish real estate business. The transaction was first announced in November 2017. Cerberus now holds an 80 percent stake in the newly established business, which goes under the name Divarian.
Loan servicer of the year
Winner: Mount Street
Runner up: CBRE Loan Services
Growing the volume of its loans under management by 40 percent to €70 billion in 2018 was “a big achievement”, says Mount Street co-founder Paul Lloyd. A lot of business was generated by securing mandates to service large volumes of loans written by lenders eager to put capital to work in anticipation of issues arising from the UK’s exit from the European Union.
Mount Street also capitalised on the new wave of CMBS deals by winning servicing contracts on 80 percent of new European issuance last year, as well as taking over mandates including the Fortezza I loan in Windermere X, which was transferred to the firm from Situs.
Technology has also been a focus: “We have invested in proprietary technology that allows clients to dial into their data online, enabling users to better manage the risk profile of their portfolios,” Lloyd says. The portal was initially designed for shipping whole loans – a product area the servicer has diversified into in a major way, though CRE remains its core business.
Expanding into the US last year, where it now holds a rating, was “monumental” for Mount Street, says Lloyd. Its servicing portfolio currently amounts to $10 billion and Lloyd sees the market as a big growth area for the company.
A further landmark deal in Europe was Mount Street’s involvement in the first sale of a secured loan portfolio by a Greek Bank: Project Amoeba. It acted as Bain Capital’s buy-side lead underwriter and is mandated to work out the largest exposures in the 1,700-asset portfolio.