Lending landscape changes forever

Real estate investment managers are chomping at the bit to enter the senior debt arena. While mezzanine debt players have already become a fixture of the real estate lending landscape in the past two years or so, senior debt funds are still evolving. A sizeable number have made their appearance in recent weeks, but more will spring up in the course of the year, predicts Michael Lindsay, head of Cushman & Wakefield’s EMEA corporate finance team.

According to Rob Wilkinson, chief investment officer at AEW Europe, the recent rash of debt fund initiatives is a clear sign that the European lending landscape is undergoing a major structural change. ‘This is one of the biggest developments to impact on the real estate market since the introduction of commercial mortgage backed securities (CMBS),' he said. 'Unquestionably this is the start of a long-term shift that will continue over the next three to five years.'

The wave of new debt platforms is being ushered in by sombre prognoses that real estate lending is set to dry up in the coming years as banks continue to deleverage their balance sheets. With the help of ex-bankers, investment managers like Henderson Global Investors are forming teams that bring together the skills needed for fixed income products, secured credit and real estate underwriting. While mezzanine and senior debt funds are rare birds in the European lending landscape, the first movers believe they will in due course become mainstream. Real estate debt funds will become a rather dull and predictable product with a good and stable return, predicted Andrew Creighton, director of Henderson Global Investors Property. As European insurers become more commonplace real estate lenders, the European property landscape will start to resemble its US counterpart more closely.

The full article appears in the April edition of PropertyEU Magazine. Click on the link below to order your copy now