In this webinar we consider how to deal with transitioning assets in a market of rising interest rates and cost uncertainties. It addresses a range of European assets across the property lifecycle to provide an in-depth picture of the various threats and opportunities and how best to deal with them.
Listen to our distinguished panelists who are sharing their experiences and difficulties they are observing on transitioning assets for investors and borrowers. The speakers represent a range of roles across the lender and investor spectrum.
Maria Ryan, Portfolio Manager, European Secured Lending, Katch Investment Group explains how Katch Investment Group specifically focuses on value-add, complex structures and helps borrowers with financing from 6 – 36 months on average. With this they support a very specific part of the asset transitioning process, which covers the final implementation phase when capex financing might be needed and tenant cash flow may be limited. Hence, they pay close attention to the business plan presented by the borrower and need to see that it meets a higher standard and improves future proofing as a whole, and is not simply changing an EPC rating by a point.
However, the planning process for a borrower with an obsolete asset starts much earlier and there are other lenders who specialise in following the borrower on a longer journey of asset transitioning. Apwinder Foster, Head of Product Strategy, DRC Savills Investment Management explains the three key strategies at DRC Savills Investment Management from senior, core+ to whole loans available with slightly higher LTV. Transitional asset can obtain financing for 3-4 years to cover the whole process to obtaining first plans, building permits and implementation.
David Tonks, International Partner, Head of Repurposing, Cushman & Wakefield talks about the importance for landlords to listen to their occupiers. Occupiers are currently driving ESG and sustainability more then legislation. Especially larger corporate occupiers have their own company targets for embedded carbon, energy efficiency and social governance driven by their shareholders, hence they will also make this a priority for the real estate they occupy.
All lenders agreed that at the end of the business plan the assets needs to show that the invested money has made an impact on the final asset - the gross development value - in terms of higher rental value, better exit yield, improved asset longevity.
Currently investors' business plans will be carefully assessed with regard to inflation pressure on capex budgets, utility costs, timeline, labor costs and availability, extra cash reserves.
Lenders will set monitoring milestones as possible default covenants to take over control in case borrowers are struggling. Alternative lenders also play an important role to educate smaller investors and make sure the business plan can be executed.
- Cléo Folkes, Partner, Head of London Research and Insight, Cushman and Wakefield
- Maria Ryan, Portfolio Manager, European Secured Lending, Katch Investment Group
- Apwinder Foster, Head of Product Strategy, DRC Savills Investment Management
- David Tonks, International Partner, Head of Repurposing, Cushman & Wakefield
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