“Investors have increasingly moved beyond their real estate allocations and have invested into real estate debt from private credit and fixed income. This has significantly widened the investor universe, both geographically and by type.”

Andrew Radkiewicz, PGIM Real Estate’s global head of private debt strategy and investor solutions, on the market for real estate debt capital [our coverage here].

What’s happening?

Green firepower
Berlin Hyp has boosted the financial firepower behind its green lending – and has done so with a view to aligning with the EU Taxonomy, which came into force in 2020 and classifies environmentally sustainable investments. The German bank concluded the first bond issuance under its new Green Bond Framework, devised to align EU Taxonomy, raising €500 million.

The framework provides for two green loan products. The first focuses on energy efficiency and is a continuation of the bank’s existing lending approach. The second is a new product aligned to the EU Taxonomy’s climate change mitigation criteria for buildings and construction activity. Berlin Hyp’s aim is for the latter product to account for 100 percent of its new business in green eligible assets from 2026 onwards. “With our new, ambitious, taxonomy-aligned Green Bond Framework we’re setting the course for the future,” said Maria Teresa Dreo-Tempsch, the bank’s board member responsible for capital markets.

Thinking logistically
London-headquartered alternative lender Cheyne Capital has built a substantial loan book in France in recent years, with more than €1 billion lent across 20 transactions since 2017. In its latest deal in the country, it has entered new sectoral territory – French logistics. Cheyne provided a €57 million loan to finance ARA Europe’s acquisition of what it described as a “state of the art XXL logistics platform” currently under construction in the Haut-de-France region. With a surface area of 1.3 million square feet, the property will consist of 10 storage cells for standard products and two Seveso storage cells, which can house hazardous substances.

The deal demonstrates that alternative lenders see value in financing high-quality logistics developments in Continental European markets. Raphael Smadja, head of French real estate at Cheyne, said the deal “marked the ideal opportunity” to enter the French logistics market, after having financed hotels, offices and residential developments in the country.

Rebranding and restructuring
Lenders should consider their appetites for financing value-add projects, because plenty of opportunities are likely to emerge. Last week, two European real estate investment firms rebranded and restructured themselves as asset managers too. Poland-based Griffin Real Estate and Belgium-based Immobel Group repositioned themselves as integrate capital raisers in addition to developers. Griffin will now be called Griffin Capital Management, expanding its purview beyond a strict real estate focus to broader private equity-style transactions. Immobel, which was once part-owned by Griffin, has launched a new co-investing manager called Immobel Capital Partners, headed by former Schroders global head of real estate Duncan Owen [his LinkedIn here].

More firms can be expected to adopt a value-add mindset. In a 14 January report [read here], consultancy Savills said the drive to decarbonise buildings will create redevelopment opportunities across Europe. This will result in more requests for debt to support such strategies. For lenders, such schemes can represent the chance to deploy capital against future-proofed assets.

Greece is the word
Momentum is building in the non-performing loan sales market in Greece and Cyprus. London-headquartered loan servicer Mount Street is among those aiming to capitalise. It has formed a new joint venture with Athens-listed investment company Technical Olympic through which Mount Street will source NPL portfolios and single-borrower exposures, plus lender-owned assets, for Technical Olympic to acquire. Mount Street will handle the servicing and workout of the assets. The JV has already acquired a €33 million portfolio of loans related to Athens-area residential properties. Ravi Joseph, Mount Street’s chief executive, told REC Europe there is a huge need for investment across the Greek market. “Underlying Greek asset values and business performance have suffered from over 10 years of underinvestment resulting from an unresolved debt overhang,” he said. Read more here.

US Managers kick off 2022 with debt fund milestones
Madison Realty Capital, Silverstein Capital Partners and Atalaya Capital Management have all kicked off 2022 with milestone fundraises, according to affiliate title Real Estate Capital USA. Madison Realty Capital, a New York-based debt manager, raised a little more than $2 billion for its largest debt fund to date [read more here]. At the same time, Silverstein Capital Partners, the lending platform of New York-based Silverstein Properties, closed a similar-sized fund. Finally, Atalaya Capital Management reached its own important milestone with a close for its inaugural real estate private equity fund, raising $100 million for the credit-focused vehicle. It is a strong start and brings lots of liquidity for what is expected to be a transaction-heavy year.

Trending topic

Target Europe
According to Knight Frank, Europe is firmly in global real estate investors’ sights in 2022. During a webinar last week, the consultancy said it expected Europe to capture close to 60 percent of global cross-border real estate capital investment this year, with 51 percent of inbound investment expected to flow into offices, with 15 percent to residential, 13 percent to logistics, and 13 percent to retail. North American investors are likely to be the main driving force of this, with Knight Frank predicting they will account for almost half of inbound investment, with private equity capital making up a third of US inflows.

Real Estate Capital USA Awards 2021

Real Estate Capital USA calls for awards submissions
Affiliate title Real Estate Capital USA has launched its inaugural awards programme. The awards encompass activity in the US real estate debt market in the 2021 calendar year and aim to honour stand-out organisations and transactions in 12 categories. The awards will celebrate the lenders, borrowers, advisers and deals that had a significant impact on the market in 2021. As they compile the shortlists, the Real Estate Capital USA team want to hear from you! To submit a nomination, click here. The deadline is Monday, 31 January.

Data snapshot

Hungry for more
More than a third of investors interviewed for private real estate association INREV’s Investor Intentions Survey 2022 [see a snapshot of the research here] indicated they would increase their allocations to European real estate debt.

Loan in focus

Starz backs Dublin office purchase
Mid-market lender Starz Real Estate clearly has faith in the Dublin office sector, despite covid’s impact on workplaces. It provided a €17 million senior loan to a joint venture between Irish developer Mm Capital and ‘special opportunities’ investor RoundShield Partners to finance their acquisition of Donnybrook House in the Dublin 4 area from KPMG, acting as receiver.

The asset was redeveloped following its 2014 purchase by Colony Capital and U+I. It currently has three tenants in its top two floors and basement, although Gregoire Millet, vice-president at Starz, sees potential for more lettings. “The combination of high-quality space, compelling property fundamentals and expectation of further value unlocking through stabilisation of occupancy rendered this an attractive and defensive lending opportunity,” he said.

Today’s Term Sheet was prepared by Daniel Cunningham, with Samantha Rowan, Jonathan Brasse, Kyle Campbell and Evelyn Lee contributing.