Since covid-19 lockdowns began across Europe around a year ago, real estate lenders have been largely forgiving of loan covenant breaches by sponsors with pandemic-related cashflow problems. In the UK, borrowers may be asking for more leniency after the government extended its moratorium on commercial tenant evictions for at least another three months.
Here, we look at that situation, and other items of interest for Europe’s real estate finance specialists.
Breathing room for tenants:
Although the UK government said on 10 March that the moratorium on commercial tenant evictions would be extended to 30 June, it added it will take further steps if there remains a significant risk to jobs by that point. Writing on recapitalnews.com last week, one property receiver, Gerald Eve’s Tony Guthrie, predicted the moratorium could persist until September, in line with wider government financial support.
It means lenders are likely to be faced with further calls for leniency from borrowers struggling to make debt repayments due to a lack of income from their real estate. Forbearance cannot last indefinitely. But many lenders are likely to bear with their sponsors through this extended period in the hope of resolving stressed situations in better market conditions later this year.
Bank of America in CMBS mode:
A handful of banks have supported Europe’s revival of commercial mortgage-backed securities issuance in recent years. Among them is Bank of America, which is so far leading the charge in 2021, launching its third European CMBS of the year this week.
Its latest deal – Taurus 2021-3 DEU – securitises €498 million of debt held against Germany’s largest office asset, The Squaire at Frankfurt Airport. It is an asset BoA is very familiar with, having previously securitised loans held against it in 2015 and 2018. Its other 2021 CMBS issuance comprised €140 million held against a Spanish office portfolio and £340 million (€397 million) against UK logistics. Its securitisation activity so far this year suggests there is pent up demand for CMBS notes among investors.
Filling the housing financing gap:
Institutional capital continues to flow to debt strategies targeted at UK residential development financing. Last week, Hilltop Credit Partners, the specialist residential lending platform owned by property investor Round Hill Capital, announced it had secured investment from multi-manager Metropolitan Real Estate to back £300 million of residential development lending in the coming three years.
Others have piled into the space recently. Last week, Randeesh and Daljit Sandhu, the former owners of lender Urban Exposure, discussed the launch of their new residential lending venture, Précis Capital Partners, backed by private equity firm TowerBrook Capital Partners. With Oaktree Capital Management also among those backing such strategies, it seems institutional capital managers are aiming to take advantage of the funding shortfall.
Erste puts faith in Romanian shoppers:
Across Europe’s retail property sector, retail parks, particularly those featuring supermarkets, have proved most resilient during the covid-19 pandemic. Vienna-headquartered Erste Group Bank, an active lender across central and eastern Europe, clearly believes in the performance of that part of the retail sector. The bank has provided a €123 million senior loan for the entire Romanian retail park portfolio of property company Mitiska REIM. “We believe in the strength and resilience of food-anchored retail during the covid-19 pandemic, as well as the significant opportunities in the Romanian market,” commented Claus Graggaber, head of international commercial real estate finance at the bank.
Cushman tips beds, sheds, and meds:
In its Signal Report: Global Guide to CRE Investing in 2021, released last week, consultant Cushman & Wakefield said equity investors will be on the front foot in Europe as soon as conditions allow. But it warned that the occupier recovery will be more protracted, with business failures and unemployment set to rise well into late 2021, if not 2022. As a result, it said, risk-averse investors will focus on core markets and long-term growth stories – namely, logistics, residential and life sciences. Lenders are likely to follow them.