A rising number of listed European real estate companies are tapping capital markets as an alternative form of financing. The growth of corporate bond issuance, alongside new non-bank lending channels such as insurance companies and debt funds, is part of a wider trend in the listed real estate sector to diversify capital sources and reduce borrowing costs.
A rising number of listed European real estate companies are tapping capital markets as an alternative form of financing. The growth of corporate bond issuance, alongside new non-bank lending channels such as insurance companies and debt funds, is part of a wider trend in the listed real estate sector to diversify capital sources and reduce borrowing costs.
By resorting to bond issuances, listed companies are also helping to shrink Europe's massive debt funding gap. Earlier this month, DTZ presented a report signalling that the European debt funding gap has shrunk by 20% to $86 bn (EUR 92 bn) over the past six months due to the growing diversity of lending channels.
The pace of bond issuances gathered pace this week with the announcement by French REIT Société Foncière Lyonnaise that it has completed the placement of a EUR 500 mln five-year bond with a coupon of 3.5%. The issue is aimed at diversifying SFL’s financing sources as well as strengthening the group's liquidity position and extending the average maturity of its debt.
SFL owns a portfolio of properties valued at EUR 3.4 bn, mainly located in the central business district of Paris.
Also in Paris, Foncière des Régions' hospitality arm Foncière des Murs announced this week that has issued a EUR 255 mln secured bond with a coupon of 3.682%. The move marks FdM's first bond issuance which is secured by hotel assets rented by Accor and matures in seven years. The company owns roughly EUR 2.9 bn of assets.
Share offerings are also gathering pace again in the UK. Last week, London-based property and investment group Great Portland Estates placed 31.25 million new ordinary shares to fund acquisitions, representing almost 10% of the current issued share capital. The proceeds will be used to acquire properties in central London, particularly the West End. Following the placement, Great Portland Estates expects to have around £400 mln in cash and undrawn credit facilities, it said in a statement.
German listed companies are also getting into the act. Last week, GSW Immobilien announced it has carried out a EUR 183 mln convertible bond issue to fund new acquisitions. The news coincided with an announcement that it is in advanced talks to buy 3,000 apartments in Berlin, just weeks after it purchased 4,400 Berlin homes for EUR 200 mln.
