14 Jul 2024
The year has started exceptionally strong in 2024 when the platform witnessed a remarkable surge in new debt requests in January reaching €1.5bn. This figure matches the cumulative activity observed in Q4 2023 alone. Overall the first half of 2024 has remained strong with a monthly volume of new financing requests of €1 – 1.2bn per months. It reflects a shared eagerness among borrowers and lenders to navigate challenging financial landscapes and discover effective solutions.
What borrowers are looking for
While 2023 was dominated to refinancing activity, acquisition financing has returned to be the strongest market driver in 2024 approx. 44% of total financing requests followed by development financing (40%). Real estate investment transaction volume across Europe are still below levels at H1 2023, however, the decline has been slowing. In addition, asset values for office, retail and logistic assets are also expected to have reached the bottom of the market which should give equity rich investors confidence to start investing. Investors are beginning to mobilise capital with the expectation of falling interest rates and the clear trends of flight to quality by occupiers in prime locations. Investment activity to expected to continue building momentum through this year and into next yearOn the financing side, the largest market stress in 2023 was caused by the insolvency of Signa. Some administrators estimates mention a total of €8.5bn claims against Signa, which has lead several European banks to report credit losses, including Unicredit, Raiffeisen International and Erste Group (€2.2bn), Julis Bear (€623m). Bank exposures to Signa is estimated to be €2.7bn across 11 banks, mostly German, Austrian and Swiss.
For debt providers such as debt funds who can raise new capital 2024 is meant to be the "golden age of debt investing" where senior to whole loan structures provide attractive returns in today’s interest rate environment.
Financing levels for new acquisitions at new market values are reaching 65% LTV again, while in comparison LTV levels on refinancings remain lower at 52-55%. Development financing is available for 65 – 75% LTC. For new loans day-one LTV levels in Italy, France and the UK are more conservative than in Northern Europe such as Germany or Sweden.
Re-emergence of office financing transactions
Since the beginning of 2024 office transactions have made a come-back accounting for 25% of all financing requests. This puts office transactions into second place behind residential development financing transactions accounting for 34%. About two thirds of residential developments are BTR/PRS projects.
Office occupiers continue to demand recent buildings with low energy consumption and high-quality services, located in sought-after neighbourhoods, which is providing opportunities for investors and developers to take refurbishments forward.
The average LTV for new office loans was 57% compared to residential with 64% LTV. Highest day-one LTV levels were offered for prime logistics with up to 68% financing, while Hotel are at the lower end with 53% LTV.
Geographically, loan requests predominantly focus on Western Europe, with an average of 45% from Germany, 14% from the Netherlands, 20% from other European countries, 10% from the United States and the remaining 11% from other non-EU countries including the UK and Switzerland.
Overall, cooling inflation and the likelihood of rate cuts in 2024 support the stabilisation of real estate yields across Europe in the second half of the year, which is also expected to bring back equity investors increasing transaction volumes.
For the first time, average deal size has also been consistently high with an average starting from €40million to €80million, indicating deals are of more institutional nature and the increasing acceptance of digital technology in the sector. "We are excited to see that FinLoop has become a steady financing information platform for borrowers and lenders in times of market distress", says founder Thomas Schneider.
With its variety of products, FinLoop is also an efficient tool for brand sensitive high-volume users to obtain fully tailored solutions to their specific criteria and requirements. The White Label module gives larger FinLoop users the best of both worlds by providing an independent and fully tailored software solution that is still connected to the whole CRE debt market. It is a technology set-up that is available on- or off-premises with a personal database and server provider choice.
For further information contact:
Nicole Lux, FinLoop, nicole@finloop.com