German CMBS bouncing back quicker than in the UK

Germany’s CMBS market has bounced back more quickly than the UK market, according to Mike Lindsay, head of corporate finance for the EMEA region at C&W in London.

Lindsay made the comment following the announcement on Friday that Germany’s largest listed residential company, Gagfah, has signed the refinancing of its €2.1 bn GRF loan via a CMBS structure. The new CMBS follows hot on the heels of Gagfah's successful ‘Taurus’ CMBS last month.

The appetite for German CMBS is partly due to the fact that there is more multifamily product in Germany, Lindsay said. 'There has also been a freeing up of capital markets in the UK and Germany and there’s a perception that the risk has reduced, swap pricing has moved up, which shows an uptick in confidence,’ he added.

As a result, some players are moving to increase their exposure to CMBS. At the end of last year, Deutsche Bank announced that it had revised upwards its forecast for its own CMBS issuances this year from between €5 bn and €10 bn to as much as €15 bn. In May, the lender closed a second CMBS secured by Blackstone’s West London business park - Chiswick Park - with all three classes pricing below the £380 mln senior loan originated just one month ago.

In total, Blackstone obtained £600 mln of refinancing, £400 mln of which was senior debt and £200 mln in mezzanine debt. (The CMBS debt was £380 mln instead of £400 mln because Deutsche Bank held £20 mln of the senior debt.)

The weighted average coupon for the £380 mln CMBS is 174.72 bps, which means that all three classes came inside the 250 basis points at which Deutsche Bank underwrote the loan to Blackstone a month ago, resulting in a profit of almost £80 mln for Blackstone, just two years after paying £480 mln for the business park.

Blackstone is believed to have abandoned its original plans to sell Chiswick Park last month, after it failed to attract any bids at the £800 mln asking price. However, given increasingly attractive financing terms, refinancing also starts to look more of a play, which could have prompted Blackstone to change tack, said one analyst who asked not to be identified. Blackstone declined to comment.