Established European lenders are competing alongside US and European life insurance companies, mortgage REITS, Private Equity funds and other money managers, according to discussions at the annual CREFC Europe conference in November. The annual meeting of the trade association for the commercial real estate finance industry in Europe discussed how these non-bank sources have cheap capital funding and, when passed on to borrowers, this is resulting in lower credit margins.
So what does this mean for real estate?
‘‘These insurance lenders are fixed income investors seeking alternatives to government and corporate bonds which have lower yields,” said Chris Holmes, Head of EMEA Debt Advisory at JLL.
“Typically these lenders are looking to match long-term liabilities by lending between 7 to 15 years against through the cycle core real estate.”
To date, several global investment banks have already issued CMBS against core assets where they have pre identified fixed income investors. CMBS carries premium to government returns and is relatively attractive to fixed income investors.
“There is a clear desire from lenders to grow CMBS issuance in 2015, but still high concerns that these borrowers are cautious,” said Chris.
The CREFC (Commercial Real Estate Finance Council) comprises of lenders, investors, advisors and other intermediaries from across Europe.