Term Sheet: Blackstone’s refinancing drive, concerns grow for the US market, CBRE launches sustainability index

Blackstone’s upcoming €1.5 billion refinancing is the latest in a slew for the US manager; concerning news emerges from the US as overdue loans hit a 10-year high; CBRE’s Sustainability Index reveals complicated findings around performance; and more in today's briefing, exclusively for our valued subscribers.

They said it

“This market, especially in office and retail, will remain under a lot of pressure and result in losses for banks”

Speaking at a Frankfurt conference, as reported by Bloomberg, Mark Branson, president of German financial watchdog BaFin, warns the troubles of investors and developers will lead to more property sales, exacerbating the slump in values and impacting lenders.

What’s happening?

Aerial photo of Mardid

Testing the refinancing market

US mega manager Blackstone looks set to be one of the most significant borrowers in the European real estate market this year, following reports by Cinco Dias the company is close to securing a €1.5 billion refinancing of its Spanish residential platform, Testa. This follows Blackstone’s announcement, on 3 November, that it had secured a DKr6.8 billion (€912 million) refinancing package for its Danish residential-focused subsidiary, Kereby.

Spanish lender Banco Santander, France’s Societe Generale and US lender Bank of America are understood to be providing the Testa refinancing, replacing a loan that will mature in February 2024. The deal will be structured with a €1.2 billion senior tranche alongside a €280 million junior tranche. Market sources say Blackstone will also be putting significant equity into the deal.

Testa, which the company purchased in 2018 for €948 million, has a portfolio of 11,000 rental homes across Spain’s major cities. This will be the third major refinancing in the Spanish market this year for Blackstone, following a €680 million loan for a portfolio of 15 Spanish hotels in April and a €440 million refinancing for its multifamily REIT Fidere in May.

Eyes on the US

Since March, when news emerged from the US of regional bank failures, European real estate debt professionals have had one eye on the performance of the world’s largest commercial property market. News this week, as reported by the Financial Times [access it here], that delinquent commercial property loans have hit a 10-year high at US banks will prompt further concerns about the state of the US real estate lending sector.

The volume of overdue commercial property loans that have missed more than one payment jumped 30 percent to $17.7 billion in Q3, the FT wrote, citing data from industry tracker BankRegData.

European lenders are affected by the situation stateside. Germany’s Aareal Bank said in its results on 9 November it had managed to generate a slightly improved year-on-year operating profit in Q3, despite increased loss allowance for its US office property finance portfolio. Loss allowance for the bank amounted to €102 million and reflected loan defaults affecting the US office market, it said.

Green revolution skips industrial

The complex factors that determine an asset’s ‘green premium’ were highlighted in CBRE’s new Sustainability Index, launched on 9 November. Among the more surprising of the consultant’s findings was that the real estate investment performance of energy efficient UK industrial assets was worse than that of those with low standards of energy efficiency. Sheds with Energy Performance Certificate ratings of ‘B’ or higher delivered a total return of 3 percent compared with 3.5 percent for properties with an EPC of C of lower – bucking the trend CBRE found for offices and retail.

Sam Carson, head of sustainability, UK valuation and advisory services, at CBRE explained to Real Estate Capital Europe the discrepancy in industrial was due to high demand and a shortage of supply. “Occupier preferences for energy efficiency are not as important as in offices, where it is a buyers’ market,” he said.

The index, based on data from 1,000 regularly valued assets, will provide increasingly detailed insights into the link between environmental performance and values. “It is easy to think of the green premium as a fixed number but…there is a really dynamic pricing arrangement, whereby both the market and the asset are influencing value,” Carson said. Read the full story here.

CTP makes full use of green bond capital

CTP, the listed logistics developer and owner, this week said it had reached its full allocation of €4.25 billion in green bonds issued to support its business parks portfolio. The company raised the capital through eight issuances from October 2020 to January 2022, which it said significantly decreased its overall financing costs. The proceeds have been used to refinance a pool of green assets, including properties in Romania and Poland, that meet the sustainability set out in its green bond framework.

“Green Bonds form an important part of our strategy to deliver our ESG ambitions and we are pleased to have fully allocated the €4.25 billion raised to date through this innovative form of green finance,” said Adam Targowski, group head of ESG management at CTP. In September, CTP received a €200 million loan from the lending arm of the EU, to support a roll-out of solar panel installation across its portfolio.

REC Europe Awards 2023

Hourglass timer

Last chance to make a submission

Time is running out to make a submission for the Real Estate Capital Europe Awards 2023. If you, your organisation or your deal should be considered for one of the shortlists, now is the time to tell us why. The deadline for submissions is midday UK time, on Friday 17 November. Click HERE to access our submissions form. The 2023 awards will have 34 categories. For our editorial team to compile shortlists, we need to hear about your 2023 achievements. The voting will open in December and the winners will be announced in print and online in March 2024. We look forward to hearing from you – be sure not to miss your chance to be in the running.


Talk of the industry

The state of the lending market and its future course, opportunities in financing alternative assets, and the challenges posed by the transition to net zero were topics in the spotlight at industry body CREFC Europe’s Autumn Conference in London last week. Here are three takeaways (keep an eye on www.recapitalnews.com for further coverage):

1. Lenders and borrowers are locked in difficult discussions: Higher interest rates have caused stress in existing loans, meaning debt providers and their clients are in discussions intended to resolve such situations. One lender acknowledged borrowers are struggling, adding they are working with sponsors to seek refinancing options, or suggesting asset sales. Most agreed, however, enforcement action is not widespread.

2. Decarbonisation continued to climb the agenda: Lenders are increasingly focused on pricing risk around an asset’s environmental credentials into real estate loans. Speakers commented on a growing focus among lenders on the data and business plans of borrowers as they apply greater amounts of scrutiny, in tune with their own environmental commitments.

3. Financing alternative assets is more popular: Panellists said there is more opportunity for lenders in less mainstream asset classes as they start to meet cashflow forecasts historically earmarked for traditional asset classes. Operational assets such as build-to-rent residential, hotels and senior living are a growing feature of many lenders’ portfolios, panellists agreed.

Data snapshot

Room with a view

Global hotel investors reported the rising cost of capital, namely debt market volatility, has significantly hindered activity in the past 12 months, with 39 percent saying their all-in cost of capital has increased by 250 basis points since the start of the year, according to consultant JLL’s Global Hotels Investor Sentiment Survey. However, the forward view was brighter, with 70 percent expecting interest rates to either remain the same or decrease over the next 12 months.

Loan in focus

Church of St Nicholas, Amsterdam

Some Dutch hospitality   

Veld Capital, which was established in 2009 as the credit investment arm of London-based manager AnaCap Financial Partners, and in 2022 spun out as an independent credit platform, has closed a significant loan in the Dutch market. The firm provided a €63 million loan to specialist hospitality operator Gr8 Hotels to refinance a 10-asset hotel portfolio located across the Netherlands, including Amsterdam, Rotterdam, Maastricht and Breda. The funding is understood to have come from Veld’s AnaCap Credit Opportunities IV, a fund it closed at €1 billion in 2019. “The strong operational growth and limited new supply, make this portfolio an ideal investment,” said Sebastien Wigdo, partner at Veld Capital.

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