Term Sheet: Bain’s debt play, Quintain’s £780m refinancing, Cromwell’s green deal

Bain Capital’s move to launch a dedicated European real estate credit strategy demonstrates the appeal of the asset class; Quintain secures a major refinancing amid tough market conditions; Cromwell’s latest loan shows sustainability is playing a growing role in property loans; and more in today's briefing, exclusively for our valued subscribers.

They said it

“It drives me crazy when I read negative headlines about commercial real estate, because that suggests commercial real estate is all one thing”

Kathleen McCarthy, global co-head of real estate at US manager Blackstone, says the firm is seeing the “greatest dispersion in performance of our entire careers” and the asset class cannot be painted with a broad brush. Watch her comments in full here.

What’s happening?

Boston: home to Bain Capital, which is targeting European real estate debt (Source: Getty)

Bain homes in on property credit
The ongoing trend of managers targeting Europe’s real estate lending market at a time when refinancing is needed shows no signs of slowing. Boston-based investment manager Bain Capital, we reported this week, is understood to be raising €400 million of capital for its first dedicated European real estate credit strategy. Previously, Bain has invested in European property debt through its diversified credit fund series, Bain Special Situations Europe, through which it has amassed around €500 million of loans. The firm did not comment to Real Estate Capital Europe about the dedicated lending vehicle. However, speaking generally about the European property lending space, Fabio Longo, partner at Bain, said the firm sees opportunities to provide “bridge-to-sale” loans, to enable developers to manoeuvre in choppy waters amid valuation uncertainty.

Arrow’s Dutch bullseye
UK-based private credit firm Arrow Global has launched a Dutch real estate platform called Mica Real Estate, as it grows its presence in the asset class. Arrow said Mica will operate as an asset and investment management platform for various strategies within the Dutch real estate market for Arrow’s funds and other third-party capital. John Calvao, managing principal at Arrow, said the new entity will be used as “boots on the ground” for Arrow to deploy through its €2.79 billion credit fund, Arrow Credit Opportunities II, and invest directly into real estate through its dedicated real estate fund in the Dutch market. The firm is expanding its real estate debt market exposure elsewhere. Last month, Arrow completed the full acquisition of UK-based property lender Maslow Capital.

Aiming high
Amid widening lending margins, alternative lenders argue Europe’s real estate debt market offers more attractive risk-adjusted returns than in equity. One firm aiming to capitalise on the looming European refinancing shortfall is Zencap Asset Management. The French manager is planning to roll out its largest European debt fund to date next year – Zencap Real Estate Debt 4, for which it is targeting €500 million. If successful, the fundraising would surpass the final close of its latest fund, which closed on €300 million in 2021. Speaking to Real Estate Capital Europe, Richard Jacquet, chief executive officer at Zencap, said the fundraising market is tough and will continue to be next year. But he argued the level of opportunity is “huge”, explaining the firm’s decision to aim for its largest debt fund to date.

Wembley way
Refinancing a loan is no easy task in this market. But Quintain, the developer behind the Wembley Park private rented residential complex located around London’s famous Wembley Stadium, this week announced a major refinancing transaction. The firm completed the refinancing of existing corporate and infrastructure loans with a £780 million (€907 million) facility from US bank JPMorgan and alternative lender Cheyne Capital, replacing a 2016 facility. Quintain has so far built more than 5,000 homes at Wembley Park and intends to continue developing out the area. Clare Morgan, head of corporate finance and treasury at Quintain, said the new loan consolidates its existing debt exposure and strengthens its balance sheet. Keep an eye out for further coverage.

Green loans increase in scope
Reducing the carbon footprint of real estate is reliant on widescale improvements in the quantity and quality of data collected by owners, and is an issue the European Central Bank is tackling as it asks banks to get a handle on the climate risks of their property loan books. It is therefore interesting to see lender HSBC Continental Europe issue a €66 million green facility for the Janki shopping centre in Warsaw, which requires borrower Cromwell Property Group to report on indirect emissions. The Australian sponsor will report on the renewable energy usage and annual greenhouse gas emissions of the asset. It will also ensure, in any given reporting year, at least half of new leases include clauses that cover Scope 3 emissions – indirect emissions that occur in the activities of an organisation. Lara Young, Cromwell’s head of ESG, said lenders were seeking borrowers that could set targets around Scope 3 emissions in a sign of “growing sophistication” in sustainability-linked lending. Read the full story here.

Data bank
The data centre sector has attracted the attention of property lenders in recent years, although it is fair to say it remains a niche of the market, many are yet to provide financing in. This week, a major deal was closed in the sector, and while this transaction did not involve debt financing, it hints at growth potential in the segment. Australia’s largest pension fund, AustralianSuper, invested €1.5 billion to buy a minority stake in hyperscale data centre platform Vantage EMEA – a company sponsored by asset manager DigitalBridge. With AustralianSuper on board, the plan is to expand Vantage across the region. AustralianSuper is understood to be putting the investment into its mid-risk portfolio, which includes direct real estate and infrastructure investments.

People moves

Weeks to go
After almost 14 years at the helm of Barings and its preincarnation, Cornerstone Real Estate Advisors, Charles Weeks (pictured above, right) is to retire. Weeks, his LinkedIn bio here, was latterly the firm’s head of European and Asia-Pacific real estate debt and equity. Before that, he was CEO for Barings’ European real estate business. He leaves the Charlotte-headquartered Barings as a PERE 100 ranked manager, in 95th place with $2.09 billion of equity raised and a business increasingly weighted towards debt assets. According to the company, it had $27 billion in real estate credit investments, compared with $19.31 billion in equity investments. Among the platform’s recent achievements under Weeks’ watch was the acquisition of Altis Property Group, a manager with A$6 billion (€3.59 billion) of assets and 44 professionals on value-add investments across sectors in Australia and New Zealand. Nick Pink (pictured above, left) has been appointed head of European real estate, and will also maintain his existing role as head of real estate portfolio management Europe.

Lambert to chair CREFC
CREFC Europe, the industry body for European real estate finance professionals, this week announced its chair elect. Alison Lambert [her LinkedIn here], a senior manager at Martley Capital Group, the new real estate investment manager set up by M7 Real Estate’s Richard Croft, has been appointed to the role to replace Nassar Hussain of advisory firm Brookland, who takes over as chair from DekaBank’s Chris Bennett. Lambert’s appointment means an executive from the borrowing side of the industry is taking the chair role at CREFC Europe.

Topland makes lending hire
UK-based alternative lender Topland has hired a former director of real estate finance at Swiss bank Credit Suisse, James Conolly, to join its structured finance team. The firm said in a statement that with Topland continuing to provide financing facilities for a range of assets in central London and the UK regions, Conolly will work as part of its structured finance division to further expand its loan book. Conolly has an extensive real estate banking background, having spent around 15 years at UK banks Royal Bank of Scotland, Metro Bank and Secure Trust Bank. In June, the firm’s structured finance team provided a £20 million development facility to Exeter Hospitality for the newly opened IHG Hotel Indigo in Exeter, following a multi-million-pound restoration.


Green buildings: the World Green Building Council is demanding change (Source: Getty)

Revolutionary waves
The World Green Building Council is demanding a “complete systematic change” from the real estate industry so it can accelerate its efforts on decarbonisation. The call comes as the organisation, and its network of 75 national green building councils, hosts World Green Building Week – a campaign for energy transition and sustainable regeneration. But a revolution in the way buildings are built and powered is only one area where radical action is urgently required. Today’s property values do not yet account for the costs of decarbonising assets, as we highlighted in a Deep Dive analysis of the topic this month. This means current property values are too high because the cost of transitioning buildings is not being factored in – a situation about which lenders are increasingly concerned. The full story, if you missed it, can be found here.

Allez les SCPIs
Cross-border investment activity is limited overall, but French property investors are taking a greater share of business. Data from consultant Savills shows French capital invested in European real estate totalled nearly €3.2 billion in H1 2023 – 10 percent of all cross-border investment, up from the 6 percent average share of the past five years. The biggest share of French capital outflows, at 32 percent, went to Spain. The UK and Italy each attracted 18 percent shares of the capital. Lydia Brissy, director of European research at Savills, said French SCPIs – real estate investment vehicles – have intensified overseas activities in the past three years. “This strategic diversification has been driven by a dual aim: to broaden the scope of their portfolio and to explore lucrative opportunities yielding attractive returns in other European nations. We expect their cross-border activity to continue over the coming months,” she said.

Data snapshot

Logistics intentions
The European logistics sector in the first half of the year accounted for €10 billion of investment, significantly below the €25.3 billion average for 2020-22, according to Savills. The results of the consultant’s European Real Estate Logistics Census, conducted alongside manager Tritax EuroBox showed continued interest in the sector, with Germany coming out top as the location property investors would most like to do business in the coming three years.

Loan in focus

PTL- Logistics Park, Noblejas: Cheyne has provided development financing. (Source: Dunas Capital)

Cheyne’s Spanish sheds loan
London-based manager Cheyne Capital has closed a development financing deal in Spain, backing the development of a logistics park located around 50 kilometres from Madrid. The circa €50 million senior loan was provided to asset manager Dunas Capital Real Estate to fund the development of the first phase of the proposed 24 million square feet PTL- Logistics Park in Noblejas in Toledo. The first phase will contain 7.7 million square feet of space. “This is surely the most important transaction in the development of logistics land in Spain in 2023,” said Rafael de Andrés and David Angulo, principals at Dunas Capital, in a joint statement.

Today’s Term Sheet was prepared by Daniel Cunningham, with Mark Mwaungulu, Lucy Scott and Charlotte D’Souza contributing