Sustainability is at the top of the real estate industry’s agenda this year and deals done in January demonstrate that lenders are also placing a huge emphasis on it. Lending deals this month also show that debt providers are increasingly keen to play a role in emerging sectors such as co-working and build-to-rent residential. Here are five deals you should know about.
1. Europe’s first ‘green’ CMBS: US investment bank Goldman Sachs’s River Green Finance 2020 commercial mortgage-backed securities issuance securitised two loans, totalling €196.2 million. They were written against the River Ouest office building in Bezons, a suburb of Paris. This is the first commercial mortgage-backed security of the year in Europe – indicating that banks still see securitisation as a viable financing tool. The main point for attention is because River Green is the first European CMBS to comply with the International Capital Market Association’s Green Bond Principles, which provide guidance to issuers of green bonds. Investors proved keen, with all four tranches pricing within guidance. If it sets a precedent for future CMBS, it could prove to be a milestone on the way to ‘greening’ commercial real estate finance.
2. A sustainable loan in Italy: On 22 January, French bank Crédit Agricole CIB and Dutch bank ING announced a 50-50 collaboration on a five-year loan provided to Italian asset manager DeA Capital Real Estate, secured by a LEED Gold-certified prime mixed-use office and retail asset located in Milan’s Piazza San Babila. The building was refurbished last year to the green standard. This deal might not be ground breaking like the River Green CMBS, but the two banks heralded it as their first green real estate loan in Italy. Banks increasingly insist their business practices are informed by sustainability principles. Deals like this suggest their real estate divisions feel the need to seek out buildings that meet such standards.
3. A Brussels collaboration: A major investment deal in January was the €1.2 billion purchase of Belgium’s largest office building, Finance Tower in Brussels. The asset has been bought by real estate manager Valesco Group, in partnership with South Korean securities firm Meritz. The purchase was supported by a €723.9 million, five-year loan provided by a club of four lenders. This was very much the sort of core, prime financing many lenders across Europe would no doubt love to have in their loan portfolios: the asset’s income comes from a lease to the Belgian government’s Buildings Agency until 2034. What makes the deal notable is the make-up of its lender group: Allianz Real Estate and Legal & General, two insurance company lenders; Sumitomo Mitsui Banking Corporation, a Japanese bank; and BayernLB, a German bank. Insurers and banks are increasingly willing to join forces in real estate financing deals, and their roles in the property finance space are blurring.
4. More debt for UK PRS: On 23 January, developer Quintain announced the latest financing deal for its vast Wembley Park rental residential scheme, with a £150.9 million loan from the merchant banking division of Goldman Sachs for 396 new apartments across three buildings at the site. The private rented residential sector is often cited as one of the main growth areas in UK real estate, but market participants report a lack of finance, relative to other sectors. Wembley Park is a flagship scheme for the sector and the involvement of Goldman Sachs shows major lenders are being convinced by the sector’s merits.
5. A London co-working loan: The £120 million loan provided by Allianz Real Estate to The Office Group, announced on 20 January, is another significant deal. The facility funds the acquisition and refurbishment of the Chancery House office building in London. It is the latest high-profile real estate financing to involve a co-working operator. It also suggests lenders are increasingly comfortable with the burgeoning sector, in the right circumstances. The fact this loan was provided to a flex operator, majority-owned by US investment giant Blackstone, and that the operator owns – rather than rents – the building probably helped convince Allianz the loan represented good business.
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