Trend watch: Oaktree’s oppo capital, Värde’s green bonds and sheds in the spotlight

Oaktree Capital Management, the Los Angeles-headquartered private equity giant, this week announced the final close of its largest real estate fund to date – an opportunistic vehicle through which it is seeking credit-related investments.

For more on this, and other key happenings in the European real estate debt market, read on.

Oaktree grows its opportunistic firepower:

According to John Brady, head of Oaktree’s global real estate group, the covid-19 pandemic has created a “compelling” set of credit-focused investment opportunities for the company’s latest fund, which includes Europe within its remit. It had intended to raise $3.5 billion for Oaktree Real Estate Opportunities Fund VIII. But this week, the firm announced a final close on $4.7 billion, demonstrating investor demand for exposure to high-yielding strategies.

About 40 percent of the capital has already been deployed or committed. Early in the pandemic, Oaktree purchased distressed real estate-related securities. However, more recently, it made investments in what it called “rescue” financings for public and private real estate lenders and owners experiencing problems with their leverage.

According to debt market sources, the European market has so far produced a limited volume of distressed real estate situations. However, managers such as Oaktree are ready when they arise.

Värde goes green with Spanish bond financing:

Real estate companies are increasingly raising capital through the issuance of bonds badged as ‘green’. Organisations including CBRE Global Investors and Atrium European Real Estate are among those to have issued green bonds this year. They were joined last week by a subsidiary of alternative investor Värde Partners.

Värde said the €300 million, five-year bond issued by one of its portfolio companies, Spain-focused housing provider Vía Célere, was the first green bond issued by a residential real estate developer in the euro-denominated market. The bonds were structured according to the International Capital Market Association’s Green Bond Principles, meaning the company’s developments must achieve an energy performance certificate rating in the top 15 percent of local housing.

The sustainable real estate finance market is still evolving. But real estate companies with defined sustainable policies in place are increasingly making environmental, social and governance considerations part of their debt deals.

Logistics in demand:

Two lenders in the European market have demonstrated their willingness to provide multi-jurisdictional finance in the in-demand logistics sector.

In the first example, investment bank Morgan Stanley has launched a commercial mortgage-backed securitisation of the entirety of a €383.5 million loan provided to US investor Blackstone for 49 last-mile logistics properties located across Germany and the Netherlands. The deal adds to a strong start to 2021 in the European CMBS market.

In the second example, Dutch bank ING this week announced a €580 million refinancing of the pan-European portfolio of manager AEW’s Logistis fund, including properties in Germany, the Czech Republic, Poland and the Netherlands. The loan was syndicated to lenders including German banks pbb Deutsche Pfandbriefbank and Berlin Hyp, plus non-bank lenders NN Investment Partners and AIB. Lenders, it seems, are queueing up for exposure to the sheds sector.

Cheyne gets behind co-living again:

The nascent concept of co-living – whereby young professionals take flexible leases on rooms in purpose-built properties with shared facilities – might appeal to those seeking human contact after a year of lockdowns. Alternatively, it might fill those that have been stuck with housemates through the pandemic with dread.

The Collective, the developer/operator which has pioneered the concept in the UK, will be hoping for the former reaction to its new scheme in the Westbourne Park area of London. It has sourced a £28.5 million (€33.4 million) loan from debt fund manager Cheyne Capital – the third loan between the pair – to finance the acquisition of the site for the scheme. The Collective and Cheyne will shortly review development finance options for the scheme – a test of lender appetite for co-living’s post-pandemic prospects.