February 2015 Issue

European real estate is back in vogue, but the market that has returned no longer resembles that of the pre-crisis boom. ING Real Estate Finance’s John Boyles, Jan-Evert Post, Mike Shields and Peter Göbel look at the drivers of this new paradigm.

There will be no let-up in capital flowing into European real estate this year, according to Emerging Trends in Real Estate Europe, the annual forecast jointly published by the Urban Land Institute (ULI) and PwC. The report – based on surveys and interviews with more than 500 European industry players – found 70% of respondents expect more equity and debt will flow into their markets this year. “It is easier to get capital than to find good deals,” said one.

CAPITAL WATCH February 2015: Recent lending deals

European loan sales hit a record high

The Spanish property market has been the apple of many a pan-European investor’s eye over the past year and with overseas capital piling in, foreign banks and lenders have followed their client base. Investment banks such as Goldman Sachs, Citi, Credit Suisse and Deutsche Bank have been active, as have commercial banks such as ING, Aareal and BNP Paribas, along with non-bank lenders such as CPPIB, Blackstone Mortgage Trust and AXA. This resurgence has been spurred by the deleveraging drive of Spain’s domestic banks, which has brought stock and non-performing loan portfolios to the market for hungry investors to buy and for their lenders to provide finance for.

Commerzbank’s planned sale of an €800m former Eurohypo German non-performing loan portfolio, in potentially optimal commercial conditions, could fire the starting gun on greater property loan deleveraging by German banks at home. Daniel Mair, a partner in Ernst & Young’s transaction advisory team in Germany, says the first sizeable German commercial real estate portfolio sale by a German bank is likely to achieve a good price “because there is a lot of investor interest and that will encourage other banks to do the same thing.

RBS sued for pulling residential scheme funding

Delegates reflect upbeat mood despite underwriting concerns