They said it
“The bulk of refinancing requests will not work in this environment. It is not debt funds’ role to solve the industry’s problems”
Patrick Züchner – chief investment officer of German debt manager Aukera Real Estate, speaking on Real Estate Capital Europe’s Germany roundtable – says his firm is wary of writing loans in potentially stressed situations where leverage is high, or future property value is uncertain. Read more here.
What’s happening?
CPIPG borrows amid deleveraging
CPI Property Group – which owns a €20 billion-plus portfolio focused on Central and Eastern Europe, including in the Czech Republic where it was founded – last week announced its half-year results. The announcement included news of a €635 million, three-year bridge facility with six banks amid the firm’s efforts to deleverage. CPIPG took on bridge finance to support its 2022 acquisition of Austrian groups Immofinanz and S Immo, of which it drew down €2.7 billion. By the end of August, it had repaid €1.7 billion, including through disposals and fresh financing, and expects further repayments this year. The latest bridge loan replaced the existing facilities and extended the maturity of the debt.
David Greenbaum, chief financial officer at CPIPG, told Real Estate Capital Europe that the firm is focused on reducing its leverage to maintain credit ratings. Indeed, CPIPG reduced net debt by more than €500 million in H1. He added that the firm’s breadth of banking relationships enabled it to undertake its latest bridge deal, despite the challenging financing environment. Keep an eye out for further coverage of the transaction.
More profit, fewer loans
In recent editions of Term Sheet, we have examined the results of Germany’s banks – some of the continent’s most significant real estate lenders. Today, property lender Berlin Hyp said that its H1 pre-tax profits of €59.3 million were “significantly higher” than the period last year – a trend it expected to continue over the next six months. However, the bank said new lending had declined in the first half of the year and that it expects issuance for 2023 to be much lower than 2022. New contracted lending was €2.4 billion, down from €3.1 billion in H1 2022.
“Market players will have to rethink their estimates, assessments and price expectations in light of the dramatic changes to interest rates, the structural shifts that have occurred in certain real estate sectors, and the fact that high inflation continues unabated,” said Sascha Klaus, chair of the bank’s board, adding that it would “take some time” for conditions to improve enough for increasing transaction activity and new construction.
Developers in need
A typical German developer in the past decade could rely on two or three banks to continuously support its projects at high loan-to-cost ratios, but this is no longer the case amid bank retrenchment, Eugene Owusu, who founded Berlin-based debt advisory business AMA Capital last month, told Real Estate Capital Europe. Residential developers are unable to obtain 80-85 percent LTC in today’s market, with even 65-70 percent LTC difficult to source, he argued. In the commercial space, bank leverage is more like 50-55 percent, he added. As a result, Owusu believes there is an opportunity for advisers to help mid-market sponsors to access debt from alternative lenders to replenish their capital stacks.
Bain grows in Greece
Last week, the special situations arm of US investment firm Bain Capital announced its latest transaction in the Greek market, with Bain Capital Special Situations acquiring Sunshine Leases, a financial leasing subsidiary of Greece’s Piraeus Bank. The deal included a portfolio of non-performing exposures, known as the Sunshine Portfolio, which has a gross book value of around €500 million, secured mainly by commercial real estate including hotels. The deal is Bain’s fifth in Greece’s non-performing loans sector. “We continue to believe Greece is one of the most attractive NPL and real estate markets in Europe,” said Nikolay Golubev, a partner at Bain Capital Special Situations.
People moves
CBRE hires from JLL for living sectors role
CBRE has appointed Jeremy Eddy, the former head of living and hospitality at rival property consultancy JLL, as its European head of living capital markets – a role which will require him to work alongside the firm’s debt team. Eddy will be responsible for the leadership of all aspects of CBRE’s European ‘living’ capital markets platform, including working in tandem with the real estate investment banking and debt advisory teams. He worked at JLL for 24 years, most recently as EMEA head of living and hospitality.
OakNorth poaches exec from fellow challenger
Michael Clifford has joined UK challenger lender OakNorth Bank as London-based senior director of strategic lending. Clifford joins from fellow challenger lender Glenhawk, where, as commercial director, he worked on product strategy and increasing distribution opportunities, reporting to its chief executive officer, Guy Harrington. OakNorth, which was founded in 2015 to finance small to medium-sized real estate borrowers, said in July it had lent £886 million (€1 billion) in the UK market during the first half of 2023.
Trending
Case for the Défense
Purpose-built business districts have not had an easy time in recent months. As our recent coverage of the troubles at London’s Canary Wharf has shown, lenders have been left exposed by the growth in hybrid working. Our attention has turned to another major European office sub-market, Paris’s financial district La Défense, to explore whether its problems are as acute as Canary Wharf’s.
A key indicator will be what happens once a €900 million loan – issued against La Défense’s landmark Couer Défense tower – expires. While the debt – provided by banks BNP Paribas, Crédit Agricole, ING and Natixis – will not mature until 2025, market participants say the owners are likely to begin gauging refinancing appetite in the coming months. Francesca Galante, Paris-based co-founder and partner of debt advisory firm First Growth Real Estate & Finance, is confident the 1985-built asset, which has 495,000 square feet of office space, will attract a range of willing lenders. Galante’s reasoning, and that of others we spoke to, is that the district is close enough to central Paris to be viable and also remains a handy alternative to the supply-constrained traditional centre of the city. La Défense’s raison d’etre is also being supported by relatively cheaper rents.
Billionaires step in, without debt
Private investors – including ultra-high-net-worth individuals and family offices – are taking advantage of the current repricing in the London office sector, according to Knight Frank. The property consultant said such investors have allocated £1.3 billion (€1.5 billion) to the sector in the past 12 months and were behind 44 percent of deals, compared with the long-term average of 36 percent. With fewer prime assets being listed for sale, wealthy buyers acquired £690 million of secondary stock in need of capital expenditure. This is not good news for lenders. With deal values averaging £62 million, cash-rich buyers have targeted smaller lot sizes to complete deals without the need to take on debt, Knight Frank said.
Data snapshot
Not so great expectations
The £18.5 billion (€22 billion) invested in UK commercial real estate during the first six months of the year represented less than half the £38.5 billion done during the same period last year, according to property consultancy BNP Paribas Real Estate. Owing to these figures, the company said it now predicts total volumes of £41 billion for 2023 overall – just a third of the value of transactions in 2022.
Loan in focus
Maslow lends in Manchester
UK residential development lender Maslow Capital, which is now fully owned by private credit firm Arrow Global, has provided a £128.5 million (€150 million) development loan to UK developer Select Property for a project in Manchester. The One Port Street scheme will bring 477 luxury apartments to the English city on its completion in 2025. The deal was Maslow’s second with Select, following the financing of its CitySuites II scheme in the city. Matt Pigram, senior partner at Maslow, said tailwinds continue to support the residential sector due to a country-wide undersupply of housing.
Today’s Term Sheet was prepared by Daniel Cunningham, with Mark Mwaungulu and Lucy Scott contributing
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