As CBRE confirms in its latest data, large equity investments in Germany are not occurring at the pace they were in 2022.
The advisor says Europe’s biggest market was 64% down in H1 compared to the same period last year. And, it is clearly not just Germany where investments have taken a nosedive. As BNP Paribas REIM makes clear, it is symptomatic of the whole of Europe, and the firm is not anticipating a significant upturn anytime soon.
If acquisitions have gone south, then so too surely has the real estate lending market.
But market participants are drawing a distinction between acquisition finance and refinance.
Active alternative lenders are telling me that something like 90% of their current pipeline is refinance as opposed to acquisition finance, which I suppose tells you everything you need to know about the market for the next few weeks.
The traditional lending banks seemed to have retrenched and are typically focussed on smaller lot sizes nowadays and at 45-50% LTVs. For other things, borrowers are turning to alternative financers for solutions.
As readers will know, the fact that interest rates have gone from zero to 4/5% is affecting the ability to pay interest. Maturing loans means borrowers have to do something, including potentially finding a big equity injection from somewhere to refinance the loan, thus creating demand for gap financing or some other helpful structure.
*On the subject of finance, my spies tell me that for the right product liquidity is certainly there. A case in point would be a £600 mln (€700 mln) finance opportunity for Greystar and ADIA’s Build-to-Rent project in Bermondsey in London, which records show the JV agreed to acquire in September 2022 from Grosvenor. So many firms have submitted quotes for this opportunity that one would imagine it is going to get done.
