Term Sheet: REC Europe’s Active Lenders 2023 list published, Hooper joins Close Brothers, AEW looks for the positives

Real Estate Capital Europe’s Active Lenders of the year list shows that debt deals were not completely off the agenda; Phil Hooper, formerly of Pluto Finance and NatWest, steps into the lead property role at merchant banking firm Close Brothers; AEW defies the gloom with a more positive outlook for 2024; and more in today's briefing, exclusively for our valued subscribers.

They said it

“I see improvements in gender equality at junior levels – critical effort now needs to be put into retaining those women”

Kate Tovey, director at Birchwood Real Estate Capital, speaks about the challenges of creating gender equality in the real estate finance industry in Real Estate Capital Europe’s winter cover story, published this week

What’s new?

Euro banknotes

Staying active

This week, online and in our winter print edition, we publish the inaugural Real Estate Capital Europe’s Active Lenders 2023. The list replaces the Top 50 Lenders of recent years, and highlights the organisations that continued to supply finance to the European real estate market this year. The first instalment of the online version can be found here, and the remaining three instalments will follow in the coming days. Here are three key takeaways.

1. The industry went down a gear: many agree that lenders are playing it safe, with some on the sidelines. But the list shows plenty remained relatively active, too. Featured lenders reported €52 billion of deals in the first three quarters of the year, down from the €93 billion they reported for full-year 2022, but a substantial volume nonetheless.

2. Some made the most of a disjointed market: 12 of the 51 lenders featured reported increased volumes in the first three quarters versus the whole of 2022. They included US private equity firm Ares Management, US manager AllianceBernstein and German lender Aukera Real Estate. For those with capital to deploy, this has been a year of opportunity.

3. Beds, sheds, and developments proved popular: logistics and various types of residential deals proved popular among the lenders. With a focus on income critical in a higher rates environment, these undersupplied and in-demand sectors made sense to lenders. Financing development was also popular, with lenders able to put money to work in the hope of more stable values in two years’ time.

Settling the account

Central London landlord Shaftesbury Capital has been issued a £300 million (€350 million) unsecured loan, enabling the group to settle the balance of a loan due to mature next year. The company, which owns some iconic parts of London, including Seven Dials in Covent Garden, and Carnaby Street, said it will use the proceeds and existing cash reserves to pay off a £576 million loan taken in March following a merger of Capital & Counties and Shaftesbury.

The new facility, provided by an unnamed lender, has a three-year term and includes extension options. It also provides a £125 million uncommitted accordion feature. Situl Jobanputra, chief financial officer of Shaftesbury, said the early refinancing highlighted “the attractiveness” of its “exceptional portfolio”.

ARA taps bond series

Manager ARA Venn, part of Hong Kong-listed ESR Group, this week announced the launch of a £350 million bond series to fund four loans to UK affordable housing providers. The bond is being issued under the Affordable Homes Guarantee Scheme, which ARA Venn manages for the UK government. The manager is providing £257 million across the four 10-year loans, which will fund the development of more than 1,500 homes across England’s Northeast, East Midlands, and the East of England. The bond issuance, guaranteed by the UK government, was priced at 55 basis points over gilts, with the loans priced at a rate of 4.8 percent.

People moves

Phil Hooper

Hooper’s next move

Phil Hooper, the one-time head of real estate finance at UK bank NatWest, has taken the helm at the property lending business of merchant banking firm Close Brothers, following a stint at alternative lender Pluto Finance. Hooper [his LinkedIn here] began this month as chief executive officer, property, at London-based Close Brothers Property Finance.

On LinkedIn, Hooper said he will be leading the business’s next phase of growth. In January, Hooper joined Pluto Finance, a London-based specialist lender that predominantly finances residential investors and developers. Hooper was originally hired by NatWest, which was subsequently bought by Royal Bank of Scotland, in 1986, joining its property division in 2004 and becoming head of UK residential real estate financing in 2014.

Chad’s back

There is nothing like a crisis to bring folks back to the market. About three-and-a-half years after retiring from industry giant Blackstone, Chad Pike, once one of the heavyweight manager’s heaviest-hitting real estate investment professionals, is back with his own firm. As affiliate title PERE revealed yesterday, Makarora has been formed with the intention of capitalising on current capital dislocation in the sector, initially in the US debt markets.

The first 10 recruits include ex-Prospect Ridge and AllianceBernstein senior executive Adam Brooks as head of debt, and an initial vehicle is expected to be introduced in the new year that could attract multiple billions of dollars from investors. According to a launch document obtained by PERE, those investors can expect a flexible investment approach – in line with Pike’s last Blackstone role as co-founder of its tactical opportunities business – but most likely kicking off with credit investments, given the debt-starved condition of the market today. For more on Pike’s comeback, click here.

Trending

Trees in a forest at sunrise

AEW’s great(er) expectations

Manager AEW has issued an early Christmas present to the market: a positive 2024 outlook. A key prediction wrapped up in the report is that costs of borrowing in the eurozone will peak in the first quarter of 2024 at just above 3.5 percent, stabilising by 2 percent by mid-2025. UK all-in borrowing costs, meanwhile, will remain 250 basis points higher at 6 percent by year-end 2025. On this basis, debt is set to become accretive in 2024, according to AEW, because it predicts cross-sector prime yields in the eurozone and UK will reach 4.8 percent and 6.2 percent respectively by the year-end 2025.

Hans Vrensen, the company’s head of research and strategy Europe, said while it may feel “a bit surprising and premature” as many continue to grapple with valuation declines and refinancing challenges, he expected investors to position themselves to take advantage of “solid returns” over the next five years.

Data snapshot

Office floor

Sentiment towards the office sector is at its lowest level since industry body CREFC Europe began running quarterly surveys of its members. While its Q4 survey showed a modest uptick in sentiment towards several sectors, offices remain in the doldrums.

Loan in focus

Tera 40 industrial estate, London

Last-mile lending

Canada Life Asset Management, a subsidiary of Canadian life assurance company Great-West Lifeco, has issued a £101 million (€118 million) loan to last-mile real estate investor Valor Real Estate Partners – the first transaction between the two companies. The five-year investment facility, provided at a loan-to-value of 50 percent, is secured against five recently acquired urban infill logistics properties located in London, including the Tera 40 industrial estate in Greenford, west London, a property occupied by tenants Tesco and Royal Mail, among others.

Some assets in the portfolio, however, are not fully leased. A 112,000 square foot estate in Mitcham, south London, is 72 percent occupied. The lender is unfazed, however, owing to acute supply shortages. Nicholas Bent, head of real estate finance, Canada Life Asset Management, explained that “very strong demand and supply dynamics” were at play. He also indicated it would be issuing further loans to Valor as it expands in the UK and Europe.


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