Term Sheet: Finloop’s drive to digitalise Dutch financing deals, why Starz revived the European CRE CLO market, lenders ponder single-family rental

Fintech firm Finloop’s deal with a debt broker could expand avenues to finance in the Dutch real estate sector; Starz Real Estate CEO David Arzi argues the case for CRE CLOs as a funding structure for alternative lenders; institutional interest in UK single-family rental presents real estate lenders with a new type of residential to finance; and more in today’s briefing, exclusively for our valued subscribers.

They said it

“We always say that any lab building could be an office building but not any office building could be a lab space.”

Colleen O’Connor, vice-president for leasing in the US East Coast and UK markets for Blackstone portfolio company BioMed Realty, tells Real Estate Capital Europe that properties targeted towards the life sciences sector need to cater for often specialised uses. Read our full analysis of how lenders are approaching the sector here.

What’s happening?

In the loop?

Efforts to digitalise the real estate financing process continue. Finloop, the fintech platform launched in January by Thomas Schneider, former CIO of online property marketplace BrickVest, and Nicole Lux, senior real estate research fellow at Bayes Business School, has struck an exclusive ‘white label’ deal with Adelaer, a Dutch commercial real estate debt broker. The broker will use the Finloop platform to expand access to debt capital for real estate in the Netherlands. Lux argued the digitalisation of the financing process will be the “fastest and most efficient way of increasing and diversifying sources of funding” in the market. Finloop said lending volumes on its platform have surged from €400 million in Q1 to a projected €5 billion by year-end. Read our January interview with the founders here.

A CRE CLO market for Europe?

In the US, the issuance of collateralised loan obligations featuring commercial real estate loans is booming. According to Bloomberg, there was almost $42 billion of issuance to 25 November, outstripping the most recent pre-pandemic annual total of $22.1 billion in 2019. But, in Europe, only one broadly distributed CRE CLO has been issued since the financial crisis – Starz Mortgage Securities 2021-1 DAC, which priced in November. It was arranged by Credit Suisse and comprised nine loans originated by mid-market lender Starz Real Estate. Last week, we published our interview with Starz CEO David Arzi, in which he said a CLO structure has benefits for alternative lenders – CLOs provide flexibility as loans can be replaced, plus they match-fund assets and liabilities. Arzi believes more alternative lenders in Europe will be convinced of the merits of issuing CRE CLOs. Read his thoughts on the matter here.

Let the good times roll

Blackstone is bullish on Berlin. The mega-firm formed a joint venture with Luxembourg-based Optimum Asset Management to recapitalise a closed-end fund focused solely on the German capital at a value of €800 million, affiliate title PERE learned. Optimum Evolution Fund SIF – Property II closed on €320 million of equity commitments in 2011 for a diversified, value-add strategy. As a result of the recap, existing investors have the option to remain invested in the assets for a longer duration or cashing out at current valuations. Such strategies have become commonplace, particularly as competition for quality assets heats up. James Seppala, Blackstone’s head of real estate Europe, said the investment speaks to the firm’s confidence in Optimum’s management capabilities and the broader German real estate market.

Trending topic

SFR in the UK

Institutional investment in single-family rental houses is big in the US, and there is a track record in parts of Europe including the Netherlands. But in the UK, where home ownership is an (increasingly remote) target for many, institutional investors have traditionally been wary of buying portfolios of standalone homes. This may be changing. Large investors, including Ares Management and Goldman Sachs Asset Management, have made SFR investments in the UK, hinting at growing investor demand. It is a controversial topic, as affiliate title PERE wrote in September – SFR investors have been blamed, stateside, for pushing up house prices and edging out individual buyers. With the market in its infancy in the UK, the debate around SFR is just getting underway, and real estate lenders are pondering the prospect of financing investors’ plays in this emerging sector. Our insight into the emerging trend can be found here.

In case you missed it

Europe’s Top 50 Lenders

Europe’s real estate industry has grown in recent years, with non-banking organisations waking up to the merits of providing loans to real estate owners, and institutional investors coveting the defensive qualities, and attractive returns, on offer from credit strategies. To reflect the growth in the sector, we have grown our signature annual list of the lenders we see as having the biggest impact on Europe’s real estate lending markets. From 40, it is now Europe’s Top 50 Lenders. It was published in full in our winter print edition last week, and online at recapitalnews.com. In case you missed it, the full list can be accessed here.

Data snapshot

Operational costs

For properties that require a lot of capital expenditure to keep them relevant to end users, strong rental growth can offset those costs. But that is not always the case. See PERE’s most recent cover story for more on this topic.

Loan in focus

Going big on BTR

Private real estate investor Cain International and manager PGIM Real Estate have joined forces for a £191 million (€225 million) loan to finance Union – a new 500,000-square-foot build-to-rent scheme in Manchester. The scheme sits in a redevelopment site known as St John’s and will comprise 1,545 private rented units and 131 affordable units in two tower blocks. Cain provided £148 million, with PGIM contributing £43 million.

Cain has now provided more than £320 million to Vita to fund its regional UK BTR drive. “We have been steadily increasing our exposure to key UK markets in recent years, as we find the fundamentals supporting higher education and BTR in UK cities to be highly attractive for our strategy,” explained Graham Keable, principal at Cain.

Today’s Term Sheet was prepared by Daniel Cunningham, with Evelyn Lee contributing.