Syndicated real estate loan market in EMEA net beneficiary of H2 capital market closure

Syndicated lending to real estate in Europe, the Middle East and Africa (EMEA) of €40.0bn in the second half of 2015, together with upward revisions for H1, drove annual volumes of €74.7bn, completing the second full year of data, as compiled by Dealogic.

dealogic 2The annual volume is estimated to be the highest syndicated real estate loan volumes since the global financial crisis and reflects a 58% year-on-year increase compared to full-year 2014 when €32.9bn of volume was reported.

EMEA syndicated lending rose by 15% from the first to the second half of the year, during a period when macro headwinds curtailed liquidity in financing markets more broadly.

The net effect of China’s equity market volatility, fears over emerging economies economic growth and falling commodity prices, was unevenly felt within real estate financing markets.

Syndication markets were likely a net beneficiary of this financial turbulence as the broad brush widening of Asset Backed Securities (ABS) spreads spilled over into the CMBS market, prompting a number of planned transactions to be re-routed for exit through syndication markets.

Peter Cosmetatos, chief executive of CREFC Europe, said: “Regulatory pressure on some banks to distribute broad appetite for commercial real estate risk and returns and the absence of an effective securitisation market are all contributing to these healthy figures.”

Senior loan margins increased over the second half of the year, particularly among Europe’s core cities, by around 20 to 30 basis points for London prime offices, for example.

Excluding loans to REITs, 2016’s volume stands at €32.9bn, a near 50% increase from 2014’s figure of €22.5bn, the league tables show. The number of non-REIT deals also picked up considerably, with 147 deals reported this time around compared to 86 in 2014.

The UK led the charge in contributing towards the volume, with €20.9bn of volume via 59 deals. Germany and France posted volumes of €19.9bn and €12.9bn respectively.

Last year’s largest deal excluding REIT activity was a €1.4bn loan to French borrower, Carmila SAS.

JP Morgan led the league table for top bookrunner and lead arranger. BAML and ING were second and third placed bookrunners, respectively, while HSBC and ING were in the second and third slots for lead arrangers. 

Jean-Maurice Elkouby, Head of REF Syndications at ING, said: “We are delighted to feature so well for the second year running in these league tables. This is a valuable tool for all stakeholders: arrangers, participants and regulators alike. We think 2016 may generate the same levels of activity as more assets change hands. Refinancings will also trigger some more volumes.”

The data collated by Dealogic based on submissions from more than 25 lenders. The database is dynamic allowing for additional historic data to be collated improving the comprehensiveness of the information over time.

In this second half of the year, LBBW began to submit data to Dealogic and additional lenders could join this year. It is widely known that major investment banks such as Goldman Sachs, Deutsche Bank and Citigroup do not submit data to this league table, but it is hoped this will change over time.

Dealogic is also seeking to secure the co-operation of the UK clearing banks and other international property lending banks, as well as insurance lenders and debt funds, to materially improve the coverage of the syndicated loans market over time.

The EMEA syndicated real estate finance league tables were launched in 2014 by Dealogic, and were supported by trade body Commercial Real Estate Finance Council (CREFC) Europe.

CREFC Europe is backing the league tables as a way to improve transparency across the CRE lending market giving market participants and observers an insight into activity levels and key players.

Steve Willingham, managing director and head of EMEA real estate finance at HSBC, said: “These league tables are an indicator of the property sector’s commitment to transparency and collaborative working; and underline how much progress has been made since the GFC in realigning our sector to minimize risk and maximize the sharing of data.

“Clearly, the greater liquidity there is in a loan, the tighter pricing that can be achieved; and the more market standard that terms develop, the more liquid it becomes. The transparency we are trying to promote here is crucial if we are to achieve the kind of sensible regulation we need to support the sector’s growth. Attracting a rich diversity of investors into real estate is positive not just for banks but for funds, developers and borrowers across the board.”

Frank Jeschke, ‎head of portfolio management at Landesbank Baden-Württemberg, said: “LBBW’s league table position once more shows the meaningful role it plays in European Commercial Real Estate Finance and is evidence of the reliable underwriting capacity it has.

“For us, it is a great confirmation of the strong relationships we have with institutional CRE investors as well as (of) our ability to access liquidity in the secondary markets through our platform due to the quality of our loans and the reputation we have with our syndicate partners.”

jwallace@costar.co.uk

dealogic FY 2015 table

About CoStar News

Finance Editor, CoStar News
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