Syndicated lending to real estate in Europe, the Middle East and Africa (EMEA) of €27.6bn in the first half of 2015 was driven by JP Morgan’s €6.25bn bridge loan to support Deutsche Annington’s Gagfah takeover – the largest syndicated loan since 2008, new data from Dealogic shows.
Liquidity in real estate finance markets has continued to benefit from low interest rates in Europe which has drawn capital flows into real estate credit driving continued downward pressure on margins.
Europe’s core cities of London, Paris and Frankfurt have tightened to around 160 basis points, according to a lending survey last month by DTZ, with growing instances of sub 100 bps term sheets offered at the sharpest end of the market.
Cheaper debt and increased liquidity in financing markets is cementing a favourable environment for large-scale leveraged real estate transactions, across corporate, mortgage-secured and loan portfolio deals.
Total syndication volumes over 75 deals was up 29% in 1H 2015 compared to the same period for the previous year, when €21.4bn was recorded in 71 deals, eclipsing an estimated €23.8bn in 1H 2008, according to Dealogic data.
Excluding corporate loan facilities, such as the Deutsche Annington bridge loan facility and credit-linked loans to real estate investment trusts (REITs), EMEA syndicated lending reached €13.4bn.
JP Morgan, underwriter of Deutsche Annington’s €6.25bn bridge loan in January, led the league table for top bookrunner and lead arranger. The 12-month loan, which carries a six-month extension option, was syndicated to UniCredit, Commerzbank, Barclays, Credit Suisse, Morgan Stanley and Société Générale.
While the deal appears vast by comparables in real estate, the anticipated utilisation of this bridge facility is expected to be relatively modest.
The facility is comprised of the €1.75bn Tranche A – priced at just 55 basis points over three-month EURIBOR which was fixed until July and thereafter linked to Deutsche Annington’s credit rating – and the €4.5bn Tranche B, set aside for the refinancing of Gagfah’s liabilities.
BNP Paribas, HSBC, Natixis and the Royal Bank of Scotland complete the top-five syndicated real estate finance bookrunner league table. Similarly, HSBC, Credit Agricole CIB, Lloyds Banking Group and BNP Paribas complete the top-five syndicated real estate finance lead arranger league table.
Excluding corporate loans to real estate companies, BNP Paribas topped the syndicated real estate finance bookrunner league table with €1.3bn, while HSBC narrowly beat Credit Agricole CIB to claim the largest lead arranger in 1H, with the banks booking just above €1bn each.
The second largest EMEA syndicated deal in the first half of the year was Land Securities’ £1.3bn secured revolving credit facility, with a headline margin of 75 bps for the first third of the facility, setting a new post-crisis low benchmark for pricing available only to the largest real estate investment trusts (REITs).
Eight banks participated, including one Chinese lender: Lloyds Banking Group, Santander Global Banking and Markets, Royal Bank of Scotland, HSBC Bank – as joint book runners and mandated lead arrangers – and Citibank, Banco de Sabadell, Bank of China and UBS.
The largest REITs are able to negotiate the best terms through negotiating with their ‘ancillary wallet’, which refers to the various book runner mandates which investment banks court, such as for new bond issuances, private placements and currency hedging facilities.
Lloyds Banking Group, Qatar National Bank and Deka Bank were joint lead arrangers in the largest single asset syndicated financing of the six month period, HSBC tower.
Qatar Investment Authority’s £1.175bn acquisition of the 1.1m sq ft HSBC Tower from National Pension Service of Korea (NPS) last December was financed in April with a five-year £705m senior loan, priced at around 135 basis points over three-month LIBO, CoStar News reported at the time.
These are the first bi-annual figures recorded for EMEA syndicated real estate finance markets, which forms part of a broader transparency driver in the sector. For the full set of tables, please click here.
The aim is to stimulate even greater long term, sustainable liquidity and increase reporting standards to equivalent precedents in global investment grade and leveraged loan markets.
ING Syndicated Finance led the initiative last year and in March produced the first ever annual syndicated real estate finance lending volumes, supported by the Commercial Real Estate Finance Council (CREFC) Europe.
The dataset still has further to improve. The German banks are still notably absent from the league tables.
Peter Cosmetatos, chief executive of CREFC Europe, said “as reporting continues to improve and the time series builds up, the league tables should become ever more interesting and valuable for market participants”.
Stuart Perry, head of leveraged and asset finance syndicate loan syndications, BNP Paribas, said: “Increasing transparency in the loan market is assisting our efforts to provide a platform with greater depth and liquidity, thus allowing potential investors to have greater confidence in entering the market.”
Matt Webster, global head of real estate finance at HSBC, said: “The increased market transparency provided by these league tables is bringing more finance parties to the market as they feel more comfortable in their market understanding and recognise the benefit of the information flow. Further growth in market participation should benefit borrowers and lenders alike.”
The German banks – along with other non-participators – would no doubt improve the dataset and subsequent analytics considerably if and when they join the transparency effort.