1 The industry went down a gear
Sources in the market say many lenders are playing it safe until conditions improve, with many on the sidelines.
However, the list shows business continued to be done, albeit in smaller volumes. Across the entries, lenders reported circa €52 billion of deals in the first three quarters of the year. This represented a decrease compared with the circa €93 billion reported by the same lenders for the full-year 2022 period.
The rising cost of debt in the past year due to interest rate rises across the UK and continental Europe has stifled real estate investment activity, meaning lenders have fewer acquisition deals to lend against. Refinancing has been a major source of activity for the lenders in the list. We asked submitters not to include in their figures existing loans which have merely been extended for the short-term, although genuine refinancing transactions were considered valid, and were a major source of business for banks and non-banks alike.
2 Some made the most of a disjointed market
Twelve of the 51 lenders reported an increase in volumes in the first three quarters of 2023 compared with full-year 2022.
They mainly consisted of alternative lenders, and included US private equity firm Ares Management, US manager AllianceBernstein and German lender Aukera Real Estate. Most lenders on this list reduced their lending, by varying degrees.
However, for those with capital to deploy, this year has been one of opportunity. Deals are undoubtedly difficult to source and many are difficult to structure, given the impact of higher rates on borrowers’ finances. But for some, the pull back from banks and the increase in loan pricing, has made for attractive lending conditions.
3 Beds, sheds and developments proved popular
Throughout the deal examples in the list, financing deals in the industrial sector feature prominently.
They are outdone by deals in various sub-sets of the residential sector, including build-to-rent apartments and student housing. For lenders, a focus on income is critical in a higher rates environment. This is leading many to logistics, an undersupplied segment in Europe where rents remain robust, and residential, which is similarly undersupplied.
Transactions in the beleaguered offices and retail sectors are less apparent in the analysis. Financing development is also popular. In an uncertain market, putting money to work today in the expectation of more stable values in two years’ time is making sense to debt providers.