Term Sheet: REC Europe’s 2023 Awards; Azora secures €640m financing package; Valuations uncertainty causes public markets strife

REC Europe’s 2023 awards launch is imminent and we are searching for the continent's real estate finance figure of the year; concerns around property valuations take listed real estate stocks to a 12-year low; Madrid-based investor Azora discusses the details behind a €640 million loan; Maslow Capital revives Manchester housing scheme; and more in today's briefing, exclusively for our valued subscribers.

They said it

“I think sellers are having a very tough time coming to terms with the new prices.”

Cathy Marcus, PGIM Real Estate co-chief executive officer and global chief operating officer, speaking on Bloomberg TV’s Wall Street Week about the state of the real estate transactions market

What’s happening?

REC Europe awards; the full list of categories, submissions form and guidelines go live next Monday

REC Europe Awards 2023

The launch of REC Europe annual awards is imminent. It is just days until you will be able to make submissions, with over 30 categories available for entry.

Following another challenging year for the market we are looking to recognise the achievements of organisations that have continued to lend and innovate regardless. In the coming weeks, our editorial team will be compiling shortlists that reflect the best of the market, and you have until Friday, 17 November, midday GMT, to make your case – across as many categories as you wish. The full list of categories, submissions form and submission guidelines, will be available on our site on Monday.

For the first time, there is an award for Real Estate Industry Figure of the Year: Europe, which will recognise the outstanding achievements of an individual over the course of the last 12 months, either in their day-to-day business or due to their contribution to the wider real estate finance industry. We are also calling for submissions for Real Estate Finance Rising Star of the Year: Europe, a category dedicated to emerging talent.

Real estate rout

Last week we reported on ratings agency Scope’s warning that in order to pay down debts, property companies facing near-term bond maturities will have to sell assets at prices representing a “severe adjustment” from today’s values. This week, a slump in listed real estate stocks was, according to Bloomberg, also down to public market anxiety over current asset valuations in the context of rising interest rates.

The Stoxx 600 Real Estate Index, which tracks property companies such as German residential landlords Vonovia, UK REIT British Land and shopping centre company Unibail-Rodamco-Westfield – slipped to its lowest level in 12 years on Monday, falling 2 percent as bond yields edged up, Bloomberg reported. The index is down by 14 percent on the year to date. “The concerns centre on property values where there is considerable uncertainty and minimal transactions to support prices,” said Bloomberg Intelligence property analyst Sue Munden. “This situation is unlikely to change until there is some visibility that interest rates have peaked.”

€640m loan helps Azora builds its nest

Lender appetite for the residential sector has been in evidence again this week, as a consortium of European banks provided a €640 million loan to Spanish investment firm Azora for its affordable residential rental platform, Nestar. Antonio López Bodas, head of capital markets at Azora, told REC Europe the company received lender interest from banks, insurance companies and debt funds. In some cases, he added, lenders were willing to provide the whole sum individually. The Madrid-based investor opted for a financing package, provided by bank lenders Natixis CIB, Banco Santander, Crédit Agricole, ING, Deutsche Bank and Banco Pichincha España.

The loan – benchmarked to three-month Euribor plus a spread of 175 basis points – was hedged, Bodas said, to mitigate the risk of rising interest rates. “Since the volume was very significant, we got access to specialised hedging providers, which lowered the prices,” he added. The loan will be repaid in a single repayment at maturity, in October 2028, and interest coverage will payable quarterly.

Maslow rescues Manchester scheme

There was further residential financing in the UK where London-based residential development lender Maslow Capital provided an £18 million (€20 million) loan to UK contractor and developer Linear Group to help complete the Trafford Gardens scheme in Manchester after the original developer went into administration. The 24-month facility will support the development of the scheme, formerly known as Botanical Gardens, a residential project comprising 116 apartments.

Maslow, which was not the original funder on the scheme, issued the loan to help Linear Group, the original contractor, purchase the site and continue its development, Sky Mapson, director of deal origination at Maslow Capital, told REC Europe. The previous developer, Investar, went into administration in 2022 after missing loan repayments from a 2021 facility provided by challenger bank Shawbrook. It is understood that Shawbrook provided a land bridge loan. Keep an eye on our site for the full story.


Milan: An increase in office rents in the city have contributed to growth in rents across Europe (Source: Getty)

Vacancy rates in perspective 

As acutely as the European investment market feels the wholesale changes in the world of work, research released on 19 October by property consultant Savills shows the stark differences in performance when the region is compared with the US. The vacancy rate in the sector Stateside currently stands at 24.4 percent, having grown from 23.5 percent since the end of 2022. Europe, meanwhile, has an 8 percent vacancy rate today – a figure unchanged since the start of the year. Savills attributed the steady vacancy rate in Europe to demand from the professional and business services sectors having offset declines from technology firms. Annual gross rents have also increased by 1.1 percent between the second and third quarter, it reported, adding this was largely driven by rises in Milan, Frankfurt and Madrid.

Fast fundraising, slow deployment

After launching the vehicle earlier this year, mega-manager Blackstone is nearly halfway to meeting the fundraising target for its seventh European opportunistic real estate fund, Blackstone Real Estate Partners VII, the New York-based mega manager disclosed during its Q3 2023 earnings call last week.

But while the firm has been raising capital at a steady clip, Blackstone has been notably slower on the deployment front. Although the manager began the investment period for BREP Europe VII last month and Europe has accounted for more than half of Blackstone’s real estate transaction activity this year, the fund is still largely uninvested, president and chief operating officer Jon Gray said.

He also noted Blackstone had invested less than 5 percent of its $30-plus billion global opportunistic real estate fund, BREP X so far, and had yet to invest the vast majority of its latest Asia real estate fund, BREP Asia III. For more on the BREP Europe VII fundraise and Gray’s thoughts on the real estate transaction market, read the full story here.

Data snapshot

Policy consequences

Euro area banks are experiencing substantially negative impacts on their market financing conditions and liquidity conditions, according to the European Central Bank’s bank lending survey for the third quarter, released on 24 October. The net percentages shown represent the difference between banks reporting improvements and those reporting a decrease in impact, alongside expectations for the next six months.

Loan in focus

Deutsche writes Lifestory loan

German lender Deutsche Bank has provided a refinancing facility to Lifestory, the residential developer backed by US private equity firm Oaktree Capital, for 21 of its UK senior living properties. The three-year amortising loan, which is understood to be in the region of £150 million (€172 million), reflects a loan-to-value ratio of around 65 percent.

Lifestory was formed in 2019 through the merger of retirement living housebuilders PegasusLife and Renaissance Retirement with open-market housing specialist Anthology. The deal created a business with more than 2,500 homes across 50 UK developments. In August of that year, manager Sculptor Real Estate – then known as Oz Management – and UK lender Lloyds Bank announced they had provided a £525 million whole loan financing to PegasusLife, which was owned by Oaktree. The proceeds were to be used to refinance and consolidate the firm’s existing borrowings and provide capital for further growth. The loan from Deutsche Bank is understood to refinance the remaining balance of that loan ahead of maturity this year with Lifestory having also disposed of sites in the subsequent years.

Active lenders report

Last chance to submit

If you think your organisation deserves to be in REC Europe’s Active Lenders 2023 report, you only have a few days left to tell us why. The deadline for submissions is midday, UK time, Friday 27 October. Inclusion will not be automatic for those that make submissions; we need to see evidence of 2023 lending to be convinced an organisation is among Europe’s active debt providers. The list will be published online from December 1 and will feature in our winter print edition. To make a submission, please fill in the form, which you will find HERE.

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