PropertyEU Editor's Choice: Logistics leaps ahead

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 27-31 January.

For more news from our daily newsletters, please go to our website and click on LAST 7 DAYS (ordered by date)

Logistics leaps ahead
Philip Dunne, CEO of Prologis Europe, had every reason to feel peeved after the INREV seminar in Amsterdam this week. Following an upbeat presentation from INREV’s research director Casper Hesp that allocations to European real estate are rising, the subsequent panel discussion failed to move beyond platitudes about Dutch real estate investors who are watching idly as German investors snap up opportunities in Amsterdam’s South Axis (Zuidas) business district. Barely a word was devoted to the industrial and logistics sector - despite the fact that UK industrial/logistics is the nr 1 preference for Dutch investors, according to INREV’s latest Investor Intentions survey. And that in the week that CBRE reported that the logistics sector saw the largest increase in transaction volumes relative to other real estate segments in Europe during 2013. Indeed, logistics property investment volumes increased by about 50% to over €14 bn in 2013, the highest figure by some distance since the €20 bn recorded in 2007, Richard Holberton, CBRE’s director of EMEA research, said during PropertyEU’s Investment Briefing in London this week.

A day after the INREV seminar, Denver-based Prologis published results that show why logistics is becoming the new poster boy of the European real estate sector. The group swung firmly back into the black and is now forecasting that rents at its European operations will grow 20% by 2016. The company booked a modest rental increase of just 1.4% on new leases and renewals in Europe in Q4 2013, but in an interview with PropertyEU Dunne said he expects rental increases to accelerate this year to around 4-5%. That prediction follows a record amount of new leasing worldwide and the launch of a number of new developments in Europe, including four speculative projects.

Exceptions to the rule
With the prospect of robust rental recovery, the logistics sector is clearly bucking the wider trend in Europe where anaemic growth remains the adage. But there are still pockets where shortage of supply has pushed up rents. This is particularly true for London offices, but also Germany’s top six office markets where rents for prime central space rose to €27.70 per m2 in 2013, the highest level since 2001, according to a new report by Savills. Excluding Hamburg, all the other markets (Berlin, Cologne, Düsseldorf, Frankfurt, and Munich) recorded rising prime rents over the past 12 months, in most cases of over 5%.

There are more signs that European markets are back on the recovery trail. For one, debt markets are continuing to thaw amid the rise of alternative lenders. Traditional lenders may still dominate commercial real estate (CRE) financing in Europe, but alternative debt providers are making significant inroads, according to Cushman & Wakefield’s new European Real Estate Lending Review. Although traditional banking lenders accounted for more than half (55%) of all CRE lending analysed in the survey, their share has been diluted from 67% in Q1 2012. At the same time, there has been a 29% increase in the number of debt funds and private equity lenders since Q1 2013. Looking ahead, a total of 41 debt funds are looking to raise €22.1 bn of capital in 2014, Cushman & Wakefield said.

According to PropertyEU research, alternative lenders UK insurer MetLife and US private equity group Starwood played a significant role in the biggest deals last year, primarily alongside European banking partners, but in one case (MetLife) on their own. The biggest deal - and possibly a portent of a future trend - was facilitated by a global banking syndicate comprising Malaysian banks CIMB and Maybank; Singapore-listed Overseas-Chinese Banking Corporation (OCBC) Bank and London-based Standard Chartered. Together they provided a €948 mln credit facility to finance the development of Battersea Power Station in London.

Recovery trail
In another sign that Southern Europe may have put the worst behind it, PropertyEU learned this week that Commerzbank is putting its Eurohypo Spanish legacy loans on the market. The German bank has hired investment bank Lazard to sell the entire real estate loan portfolio owned in Spain by Hypothekenbank Frankfurt (formerly Eurohypo), its specialist property lending business. The sale - which is likely to be one of the largest Continental European loan disposals this year - involves around €3.3 bn of performing loans and another €1.7 bn of non-performing assets.

With the current turmoil in emerging markets, Europe is gaining ground as a safe bet for North American investors. Some - like Canada’s Bank of Montreal - are thinking big: this week it emerged that Canada’s fourth-largest lender by assets is on the acquisition trail to buy F&C Asset Management for about £708 mln (€850 mln). Cornerstone’s appointment of industry veteran Scott D. Brown as president to the firm also indicates its intentions: the hire underscores earlier comments from Cornerstone’s CEO David Reilly that the US company it actively seeking opportunities in Europe to expand its operations. Brown has been appointed to head the company’s global expansion as it enters its next phase of growth, Reilly commented in a press release.

Judi Seebus
Editor in chief PropertyEU


OTHER DEALS & HEADLINES
Mount Street buys €5.5b Morgan Stanley Mortgage Servicing business
Mount Street has finalised the acquisition of Morgan Stanley's £4.5 bn (€5.5 bn) loan mortgage servicing (MSMS) business, bringing its loans under management to £8bn.

British Land poised to sell 2 retail parks in Sp√ain
Private equity firm Kohlberg Kravis Roberts is on the verge of acquiring two Spanish retail parks from UK REIT British Land for some €100 mln in total.

Apollo on brink of acquiring pan-European hotel portfolio
US private equity firm Apollo Global Management is on the brink of acquiring a pan-European hotel portfolio from Canadian property group Ivanhoe Cambridge for €425 mln, according to those who track the market.

Evans Randall refinances German retail asset with Allianz
Evans Randall, the privately-held UK investment banking and private equity group, has completed a full refinancing of its senior debt position on its Königsbau Passagen shopping centre in Stuttgart, Germany.

Rockspring inks core-plus acquisitions in Hamburg
Rockspring Property Investment Managers has acquired three core-plus office and commercial assets in Germany totalling 24,350 m2 from Valad Europe.

Invesco spends big on Polish and UK shopping centres
Invesco Real Estate (IRE) claims its flagship pan-European Fund is one of the largest open-ended property funds in Europe after large shopping centre acquisitions in Poland and the UK lifted its assets under management to €1.3 bn.

Valad Europe adds six assets to its UK industrial fund
Valad Europe, the leading diversified real estate investment manager, has completed on an additional three deals comprising six distribution warehouses for a total of £20.4 mln (€24.7 bn).

For more news from our daily newsletters, please go to our website and click on LAST 7 DAYS (ordered by date)