Editor's Choice: [b]Deleveraging picks up speed[/b]

Welcome to Editor’s Choice - a weekly snapshot and roundup of the top stories published in our daily PropertyEU newsletter. Here’s our selection of the main news headlines and top deals in the European real estate market for the week of 3-7 February.

Deleveraging picks up speed
Thanks to a cautious lending policy in the heady years of the recent real estate boom, French banks have emerged relatively unscathed from the current financial crisis. So it came as something of a surprise to see the French capital unwittingly become the backdrop this week of a new chapter in the ongoing deleveraging saga. On the same day that US private equity firm Lone Star announced it is taking control of Coeur Défense through a CMBS structure, just a few kilometres away in the Westin Hotel a panel of leading real estate debt experts were unanimous that commercial real estate loan sales are set to increase ‘massively’ in the next two years. A number of ‘pretty tough’ deadlines loom on the European horizon that will speed up the process, according to Peter Denton, head of European debt at Starwood Capital Group.

His prediction and that of others at the ULI annual conference in Paris were shored up by a new report from Cushman and Wakefield which reveals that the value of European property loan sales will hit €40 bn this year. That figure would mark a 32% increase on the €30.3 bn transacted in 2013. A surge in sales began last year and this year has already seen 10 major transactions, with Morgan Stanley’s sale of €5.6 bn of commercial mortgage-backed securities (CMBS) to Mount Street forming the bulk of the €7.1 bn total to date this year. Another US player that has been feeding on European distress is Kennedy Wilson. Last year, the US investor completed the largest single CMBS acquisition in Ireland in the current economic cycle with the purchase of the matured Opera Finance CMBS portfolio. The group clearly has appetite for more: according to a news report by PropertyWeek, the company is planning to raise £750 mln (€912 mln) in an initial public offering on the London Stock Exchange to invest in fresh opportunities in the UK, Ireland and Spain.

While US investors continue to dominate the stage in Europe’s unfolding real estate debt drama, the Chinese are claiming a key role in the hotel arena. Indeed, Chinese property investors will make 10% of all international hotel purchases by 2017, according to a new report from estate agent Savills. The prediction follows a rise in outbound tourism from China, which has overtaken the US as world leader in number of overnight international stays. Hong Kong and mainland Chinese buyers are already active in the UK and earlier this year, Greenland Group followed in the steps of major Chinese developers like Dalian Wanda and ABP and bought the Ram brewery development - its own eye-catching site in London. Chinese banks, but also their peers from the Middle East and home-grown players like RBS and Aareal are also helping to improve debt conditions in the hotel market while alternative lenders such as AIG and M&G are entering the senior debt markets and there is no shortage of mezzanine debt available from debt funds. All this funding will help fuel hotel investment across Europe , according to Jones Lang LaSalle’s Hotel & Hospitality Group. After booking a rise of 17% to $13.2 bn (€9.8 bn) in 2013, investment in Europe, the Middle East and Africa (EMEA) is expected to grow by over 20% during 2014, the firm says in its latest Hotel Investment Outlook report.

French funds make a splash
There was more news out of France this week. Just four months after forming a strategic partnership, French asset manager La Francaise and UK-based Forum Partners announced they have acquired Cushman & Wakefield Investors (CWI), the investment management business of Cushman & Wakefield. The new combined platform is making further strides in the top investor rankings with total assets under management close to $20 bn (€14.8 bn).

Still in France, Internos Global Investors announced this week that it has formed a joint venture with French fund manager Paref Gestion to launch a SCPI fund that will invest exclusively in German retail park assets. Another fast-growing peer, Tristan Capital Partners, reported that it has capped the final equity raise on its EPISO 3 value-add/opportunistic fund at €950 mln, exceeding its original target for fundraising by 25%. A new star in the pan-European fund manager firmament is Dublin-based Greenman Investments. After acquiring 18 warehouses in Germany with its Greenman Retail Fund, it now aims to use its new AIFM licence for a buying spree with two new closed-end funds structured as a SICAV in Luxembourg. ‘That will give us the opportunity to also target investors in other countries like the UK, Switzerland, France and even Germany,' John Wilkinson, CEO and co-founder of Greenman Investments, told PropertyEU. ‘Investors from those countries are not familiar with Irish fund structures, but they are familiar with SICAV structures.

Finally, there was good news from Europe's largest listed property group this week: Unibail-Rodamco reported net rental income rose 5.6% in 2013 and the company remains upbeat for rental income growth prospects in the current year. Meanwhile the world’s largest real estate adviser CBRE joined its nearest rival Jones Lang LaSalle to report continued strong growth in both earnings and revenue.

Judi Seebus
Editor in chief PropertyEU

OTHER DEALS & HEADLINES
US investor buys Dutch mall portfolio at big discount
Bouwfonds IM acquires car park in Oslo
Rockspring inks core-plus acquisitions in Hamburg
Pramerica closes €37m of industrial deals
Qataris buy Reinaissance hotel in Barcelona for €78m
Union pulls off largest office buy in Luxembourg
Schroder Property buys office property in Berlin
Pbb, Berlin Hyp, LBBW provide €241m refinancing to DIC Asset

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