So far, 2021 has delivered notable examples of real estate companies opting to raise finance in European markets through bond issues structured to comply with sustainability criteria.
In January, property manager CBRE Global Investors raised €500 million via a green bond issue. In February, central and eastern European investor Atrium European Real Estate raised €300 million, followed in March by a Spanish house-building subsidiary of US alternatives manager Värde Partners, which also raised €300 million.
They were joined last week by Canary Wharf Group, the real estate investment trust which owns the business estate of the same name in London’s Docklands. It issued £906.3 million (€1 billion) of green bonds – its first foray into the sustainable capital markets. For more on this, and the past week’s happenings, read on.
Green bond bonanza:
In a statement announcing the issue, CWG said the offer met strong demand and the proceeds will be used to finance and refinance a pool of “green assets”. Shobi Khan, the company’s chief executive, interpreted demand for notes as a reflection of “investors’ recognition of CWG’s role as the largest sustainable developer in the UK and our commitment to be net zero by 2030”.
Sponsors with a clearly defined commitment to buying or developing properties that meet the industry’s sustainability expectations are increasingly making such strategies a crucial factor in their capital raising activities. By sourcing so-called ‘green’ debt, sponsors make a statement about their real estate strategies, because the proceeds are limited to assets that meet pre-agreed sustainability criteria.
In a March interview, Tim Mooney, chief executive of Värde Partners, speaking after the €300 million green bond issue by its Spanish residential subsidiary, Vía Célere, argued the decision to go green was not taken to drive higher demand or tighter pricing of the notes. Rather it was to underscore its strategy to create sustainable housing products in the Spanish market.
Helaba goes big on its home turf:
This week, the head of real estate finance for Germany at Frankfurt-based bank Helaba told Real Estate Capital why the bank was comfortable being the sole underwriter of a senior loan to back the circa €700 million purchase of one of the city’s most prominent office towers. The Silberturm skyscraper, fully occupied by German railway company Deutsche Bahn, was bought by Austrian company Imfarr and Swiss investor SN Beteiligungen from Korean investor Samsung.
Fritz Müller said the quality of the asset and its occupier were paramount in its decision to lend, as was the bank’s familiarity with the skyscraper’s location. “There are around 200 metres between the Helaba tower and the Silberturm tower,” he said.
Müller added that several other lenders lined up with offers of finance for the trophy asset. Helaba’s plan now is to syndicate part of the loan, including to German savings banks and senior lenders.
Knight Frank’s capital advisory push:
Large real estate consultancies are building out their capital advisory capabilities, as they strive to offer a full range of property services to clients – including raising finance. In March, consultancy giant JLL bought London-based advisory firm CAPRA Global Partners, as part of its push to be a key player in the real estate capital markets.
Now, London-headquartered Knight Frank has launched a new division – Knight Frank Capital Advisory – designed to provide clients with capital-raising assistance across debt and equity. The company has an existing debt advisory business, run by Lisa Attenborough, which launched in 2017 and will continue to operate within the KFCA business line.
Birju Shah, the former property banker hired to run the new division, told Real Estate Capital that combining debt and equity advice makes sense in today’s market. “Clients need capital, full stop. It is important to understand a client’s strategy to work out what capital it needs, be that senior debt, equity or something in between,” he said.
He added that KFCA plans to expand into placement agency work for clients. As sources of capital – both debt and equity – expand across European markets, such consultancies are keen to play a key role as the market’s facilitators.
Oaktree talks life sciences:
Private equity giant Oaktree Capital Management last week wrote about its belief in lending to the life sciences industry. Oaktree’s research piece focused on direct lending to life sciences companies, rather than against the real estate such companies occupy, and focused on the US market, rather than Europe. However, its views on the industry will be interesting reading for financiers thinking about writing loans against life sciences properties in Europe.
Oaktree wrote that it believes demand for healthcare innovation will long outlast the covid-19 crisis and will intensify in the coming years as populations age and the middle class expands. It added that advancements in this capital-intensive industry will require significant spending on technology, equipment and research and development.
In case you missed it, our February feature on financing life sciences real estate explained that lender appetite for the sector is growing. However, sources stressed that a real understanding of the life sciences industry is essential when underwriting loans, with space requirements, and the use of that space, significantly different depending on the activities the occupier is engaged in.