The Real Estate Capital Debt Fund 30 highlighted some of the key trends within Europe’s private real estate debt market today. Here, we identify five key takeaways from the ranking.
2020 was a strong year for the biggest alternative lenders
Although market sources say interest in European real estate debt strategies had been growing before the pandemic, many agree the covid-19 crisis has boosted investors’ convictions around property credit as an asset class. Many of Europe’s banks have further reduced their appetites for real estate lending in response to the pandemic, thus paving the way for alternative lenders to grow their share of the market. The data suggest investors were keen to capitalise. Collectively, the top five managers alone closed more than $10 billion of real estate debt funds and separate account mandates in 2020, significantly boosting overall fundraising figures for the five-year period.
The leading cohort is hard to displace
Although non-bank lenders are steadily growing in influence in Europe, they remain a relatively new feature of the market, with many having set up shop in response to the global financial crisis of 2007-08. That, in part, explains why the first movers among them have largely dominated this ranking since its inception. This year, AXA retained first place, ICG Real Estate remained second, LaSalle Investment Management stayed in fourth and DRC Capital in fifth. M&G’s move into third place was due in part to the inclusion of the large European component of its multi-regional funds in this year’s methodology.
Volume of fundraising closed during 2020 by the top five ranked organisations
There are newcomers in the ranking
This year’s ranking includes six organisations that did not feature in 2020. In part, that reflects the steady flow of new entrants to the sector – most notably US manager AllianceBernstein, which came to the market in 2020 with €1.65 billion of fresh capital. It also reflects the growth of lending businesses through the raising of third-party capital, such as BlackRock, which entered in 29th place. Other new entrants include Goldman Sachs Private Real Estate – a longstanding market participant that made the ranking due to a change in methodology by which the European components of multi-regional debt funds are counted, where identifiable.
Number of managers in the ranking that did not feature in the 2020 edition
The size of lending platforms varies considerably
The ranking provides a glimpse of the various types of organisations active in the non-bank part of Europe’s real estate finance market, including insurance companies, asset managers, and specialist lenders. There is also a gulf between the fundraising totals of AXA IM – Alts – a major investment manager targeting large-scale participation in senior lending deals – and some of the independent managers in the bottom part of the list that are raising smaller funds for specialist or high-yielding strategies. Some of the managers in the ranking also lend from internal sources of capital, meaning the ranking does not document their overall lending capacity.
London remains the place to be
The data show the UK capital is the hub of Europe’s alternative real estate lending market. Twelve of the 30 organisations, accounting for 35 percent of the capital raised, are headquartered in London.
Several other companies that feature in the ranking, including many listed as having their headquarters in the US, also run their European property debt businesses from London.
Although there are notable examples of private real estate debt managers located across continental Europe, a large proportion of the financing activity closed across the continent by non-bank lenders is done by London-based managers.