They said it
“If I’m getting 10 percent returns on a senior loan today, why would I do mezzanine?”
Ralf Kind, head of real estate debt at manager Edmond de Rothschild REIM, discussing plans for its next credit fund and how the firm can be flexible to market conditions despite its high-yield focus. Read more here.
Awards winners revealed!
At long last, the winners of the Real Estate Capital Europe Awards 2022 can be announced. In November, we invited submissions. Our editorial team sifted through them, conducted proprietary research, canvassed industry opinion, and compiled shortlists for 37 categories. The awards went to a public vote between December and January.
The winners earned their accolades despite a tough set of market circumstances, including the impact of inflation, rising rates and economic volatility. Among the big winners were US manager Blackstone and PIMCO Prime Real Estate – the newly renamed Allianz Real Estate – which each scooped five awards this year.
The 2022 awards were the biggest yet, with new categories including sector-specific awards for lending against offices, logistics, retail and residential. Our award for Social Impact Lender of the Year: Europe also made its debut. To find out who won, and access all our coverage, click here.
Alantra’s fundraising plans
London-headquartered financial services firm Alantra has started fundraising for a ‘top-up’ fund to its maiden real estate debt vehicle as it sees an opportunity to lend in the current market climate. The firm will look to raise between €50 million to €100 million in the near-term, before launching its second property fund in 2024.
The firm closed its Alteralia Real Estate Debt fund in 2021, raising €160 million. The business has so far deployed €140 million. Speaking to Real Estate Capital Europe, Jaime Cano, Madrid-based partner at Alantra private debt, said the firm has been very active since summer last year. In the last six months the firm has deployed €100 million.
ESG deadline looms
Bank lenders across Europe only have a matter of weeks left to prove to the European Central Bank that they are getting on top of climate risk. A deadline set by the regulator in 2020 for the end of this month requires banks to have met all of the ECB’s “supervisory expectations”, set out to ensure banks prepare for environmental crisis [read more here].
Within weeks, bank lenders under the ECB’s supervision need to have fully integrated capital adequacy assessments and stress testing into their business activities. In a review paper published in November, the ECB said “too many banks are hoping for the best while not preparing for the worst” – but it has signalled concerns about real estate, in particular. For a deep dive into why, read more here.
A London home connected to a member of the Saudi royal family has been put up for sale after a £160 million (€183 million), three-year loan issued against the property expired, according to trade publication React News. The Holme, a mansion in the heart of London’s Regent’s Park, is currently owned by a Guernsey-based vehicle – of which Abdullah bin Khaled bin Sultan Al Saud is a beneficial owner, according to React. But the property, built in 1818, is being marketed with a £250 million price tag by real estate advisers – the Mayfair-based Beauchamp Estates and Knight Frank – because the debt expired at the end of last year and has not been refinanced or repaid, it added.
Amend rather than pretend
‘Extend-and-pretend’ is one phrase that defines the aftermath of the global financial crisis, when banks were willing to live with loan-to-value covenant breaches and extend the terms of problem loans in what many called “kicking the can down the road”.
However, this term is inappropriate for the current market situation. Sources tell us lenders are adopting an ‘amend-and-extend’ approach as they work with borrowers facing loan expiries, because higher financing costs are straining interest coverage ratios and creating more immediate concerns. Lenders are therefore being more proactive, working collaboratively and granting extensions to give borrowers time to undertake near-term business plans. This ‘amend-and-extend’ approach comes, however, with conditions attached – to read our thoughts on the matter click here.
German office divergence
Data from German lender pbb Deutsche Pfandbriefbank, from its real estate pbbIX index [see here], shows the growing divergence between the office take-up and office investment markets in Germany. While take-up is being driven by relatively high demand and rising rents for first-class properties, investment market players are reticent against a backdrop of higher capital market interest rates.
A total of 37.7 million square feet was taken up in the big seven German city markets over the year, of which 20 percent was seen in the fourth quarter – only rivalled by the boom years of 2016 and 2019.
Meanwhile, last year’s €16.5 billion of investment was the lowest total since 2014. The bank said the increase in net initial yields, which have been trending upwards since the second quarter of 2022 and gained momentum in the last quarter of the year, demonstrates that price expectations of buyers and sellers still do not match, but that they have started moving on the back of weak investment demand.
The Q1 sentiment survey by industry body CREFC Europe showed respondents feel more positive this quarter about prospects for asset classes. However, the improvement in sentiment towards offices was negligible. Read more here.
Loan in focus
Cheyne doubles down in the Nordics
London-based asset management firm Cheyne Capital has provided a €62 million senior construction loan to Finnish developer Samla Capital for the redevelopment of the Hotel Maria, a luxury hotel located in the Kruununhaka area of Helsinki, Finland. The deal marks the second time the London manager has transacted in the Nordic region.
Salma will use the loan to redevelop the 150,000 square foot hotel, which, when finished, will comprise 117 rooms, two restaurants, two bars, a spa, a gym and a ballroom, as well as a small chapel. The hotel is expected to open in December 2023.
“Luxury tourism is a growing market and the demand for hotels that meet this need is also emerging across Finland,” said Samppa Lajunen, founder and portfolio manager of Samla Capital.
Today’s Term Sheet was prepared by Daniel Cunningham, with Lucy Scott, and Mark Mwaungulu contributing