European Commercial Real Estate Finance 2016 Update

Transcription

1 VIEWPOINT CBRE Capital Advisors analysis of trends in Europe s debt market European Commercial Real Estate Finance 216 Update

2 Michael Haddock Senior Director, EMEA Research and Consulting Paul Lewis Senior Director, Capital Advisors Isra Erpaiboon Senior Analyst, Capital Advisors HIGHLIGHTS In this year s debt report, we identify the trends underpinning the size and make-up of Europe s debt market. We round up the principal features affecting loan sales, and we look ahead to predict how changes in risk appetite within and outside the real estate sector have the potential to affect future sales and pricing. KEY CONCLUSIONS: The stability of the debt market shows through clearly in our estimates of lending margins across Europe. As we predicted in last year s report, after falling steeply through 213 and 214, lending margins were generally stable in 215 for loans made against well-let, high-quality property. The amount of new debt issued has gone up rapidly over the last two years, up to 127 billion in 215, which is a function of the higher turnover of the investment market and the greater use of leverage across transactions. 215 saw a 17% increase in CRE and residential loan sales with circa 85 billion traded. Interestingly, 44% of these portfolios is collateralised by residential properties. 215 marks a pivotal year for Italy and the Netherlands, as the long anticipated deleveraging programmes have commenced. Across Europe with bank costs of capital so low, we expect to see increases in NPL volumes driven by regulatory pressures and a rise in the number of more structured solutions to divest NPLS without sacrificing all the upside to private equity buyers. 216 UPDATE CBRE Capital Advisors CBRE Limited 2

3 A YEAR OF EVOLUTION After several years of revolution in the European debt market, 215 felt more like a year of evolution. Conditions in the underlying commercial real estate investment market continued to improve and the use of debt in those transactions continued to increase. But in both cases this was the continuation of an existing trend rather than the start of a new one. The same is true in the European loan sales market, where after the explosion in activity in 214 there was steady growth in 215. In this year s debt report, we identify the trends underpinning the size and make-up of Europe s debt market. We round up the principal features affecting loan sales, and we look ahead to predict how changes in risk appetite within and outside the real estate sector have the potential to affect future sales and pricing. EUROPEAN LENDING MARGINS STABILISE The stability of the debt market shows through clearly in our estimates of lending margins across Europe. As we predicted in last year s report, after falling steeply through 213 and 214, lending margins were generally stable in 215 for loans made against well-let, high-quality property. FIGURE 1: CRE SENIOR LENDING MARGINS (OVER LIBOR/EURIBOR) Margins started to stabilise in Q Germany Netherlands Spain UK Ireland Q4 29 Q1 21 Q2 21 Q3 21 Q4 21 Q1 211 Q2 211 Q3 211 Basis Points Q4 211 Q1 212 Q2 212 Q3 212 Q4 212 Q1 213 Q2 213 Q3 213 Q4 213 Q1 214 Q2 214 Q3 214 Q4 214 Q1 215 Q2 215 Q3 215 Q4 215 Source: CBRE Research 216 UPDATE CBRE Capital Advisors CBRE Limited 3

4 Our analysis suggests that the total (nominal) value of European CRE investment debt increased very slightly over the course of 215, from 1.8 trillion to 1.12 trillion 1. The retirement of existing debt, either as a result of property sales or active management, offsets an increase in new lending. In fact this has been a common theme over the last few years. Although the rate at which old debt has been retired has accelerated over the last few years as market conditions have become more favourable, so too has the rate at which new debt has been issued as the level of transactions has increased and average LTVs have increased. FIGURE 2: DEBT-EQUITY SPLIT IN CRE TRANSACTIONS The proportion of debt in deals went up last year 3 Equity Debt Billion Source: CBRE Research The amount of new debt issued has gone up rapidly over the last two years, which is a function of the higher turnover of the investment market and the greater use of debt (on average) per transaction. We estimate there was 62 billion of new debt issued in 213, based on 38% out of 164 billion of CRE investment, and that this increased to 127 billion in 215, based on 47% out of a record 273 billion of CRE investment. This increase looks steep, but viewed in the context of the pre-crisis years, it is less new debt than in either 26 or 27, despite a bigger underlying market. Whilst debt usage in terms of average LTVs has generally been increasing since 21, LTV levels are still relatively low by long term historic standards and well below the peak seen in The euro value of the debt stock can be affected significantly by the euro-sterling exchange rate. In order to allow a like-for-like comparison the value of the 214 debt stock is calculated on the basis of the end-215 exchange rate. 216 UPDATE CBRE Capital Advisors CBRE Limited 4

5 RISE IN DEBT LEVELS MAY SLOW Looking ahead it is not clear that the trend of the last couple of years for the amount of debt to rise will continue, because: Our forecasts suggest that we are close to the peak in terms of levels of investment activity, with some early signs of turnover growth slowing in Q4 215; There has been a subtle change in the nature of the investment market since late 215. Investors march up the risk curve appears to be coming to a halt and there has been a refocus on the prime end of the market. This shows through quite strongly in pricing trends, with the decline in prime yields outpacing that in secondary in H2 215; The three year trend in relaxation in lending terms also seems to be slowing. Indeed anecdotally some lenders have been tightening their lending criteria in recent months. Whilst high leverage remains achievable, this is generally through the introduction of capital from mezzanine and other opportunistic capital, rather than an increase in mainstream senior debt levels. The drivers of these three changes are worth considering. A notable feature of the multiasset investment environment in the last months of 215 and the first of 216 has been volatility in global equity markets. The slowdown in economic growth in China and the fallout from low oil prices are the main causes, but concern is growing too about the sustainability of the economic recovery in the USA, with several respected commentators discussing the possibility of a US recession in 216. Although a US recession still looks quite a low probability at the moment, the possibility is likely to cause a more defensive mind-set in H Looking at the other side of the equation, the record investment activity, coupled with an aggregate of 16 billion in commercial real estate loan sales in 214 and 215, means that the opportunities for debt to be retired through loan to own or foreclosure strategies have been substantial. The buyers of debt are very active in managing it, with a range of strategies to maximise returns. Some of these will include refinancing, but some result in the complete retirement of the debt. Taken together these two effects are starting to change the nature of Europe s debt stock. An increasing proportion is made up of new debt, issued in the post crisis market. The debt will be at relatively low loan to values as lending terms since the crisis have been more conservative and strong capital value growth will have reduced the effective LTV further. 216 UPDATE CBRE Capital Advisors CBRE Limited 5

6 FIGURE 3: BREAKDOWN OF EUROPEAN DEBT STOCK (AT END 215) Legacy debt is declining and new debt, issued post crisis, is increasing % of Total Lending refinanced or rolled over after 27 Lending refinanced before the end of 27 25% New lending before the end of 27 New lending before the end of 212 9% 51% End of 214 New lending before the end of 215 1% 5% Source: CBRE Research HISTORIC DEBT LEGACY CONTINUES TO DECLINE There is still a substantial legacy of historic debt on European bank balance sheets. The capital value growth in the last few years will have improved the quality of some of this legacy debt, but it remains the case that recent capital value growth has been disproportionately in the prime segments of the market, and in many cases will have been offset by lack of capital investment or active management. The fact that in most of Europe the development cycle has not yet restarted suggests that loans against development land will still in most cases be out of the money. (These loans lie outside the scope of this analysis, but were substantial in 26/7.) We believe it is likely that the amount of legacy debt will continue to diminish in the next few years. Already a substantial amount has transferred into the ownership of non-bank vehicles in some jurisdictions. The combination of a strong investment market and increasingly active management of the debt stock should erode the legacy rapidly going forward. As the influence of legacy debt diminishes, the duration profile of the European debt stock is also normalising. According to our estimates about half (52%) of European CRE debt is due to mature over the next three years. This would be consistent with other estimates of the average duration of new loans being issued. The De Montfort Report 2, for example, found that the average length of new loans granted in the UK in 214 was 5.3 years. 2 The UK Commercial Property Lending Market Research Findings 214 Year End, Maxted and Porter May UPDATE CBRE Capital Advisors CBRE Limited 6

7 The very weak transactions market in 29/11 means that there is relatively little debt issued then maturing now. The vast majority of CRE debt due to mature in 216/17 is therefore legacy debt that has been either rolled over or refinanced from earlier years. FIGURE 4: CRE DEBT MATURITY IN EUROPE (AT END OF 215) The majority of debt maturing in the next three years will be legacy loans 25 UK Germany France Iberia RoE 1% 9% 2 8% 7% Billlion % 5% 4% % of Total Stock 5 3% 2% 1% % Source: CBRE Research 216 UPDATE CBRE Capital Advisors CBRE Limited 7

8 THE LOAN SALE MARKET Robust activity continued in the European NPL market in 215. CBRE Capital Advisors recorded approximately 85.8 billion of commercial real estate (CRE) and residential loan sale transactions last year (excluding REOs), which shows significant 17% growth from 214 s 73.3 billion. FIGURE 5: ANNUAL TRANSACTION VOLUME, Loan sales rose by 17% in CRE Residential Total Consideration ( bn) , ,294 Source: CBRE Capital Advisors One trend last year was the tremendous pick-up in activity from a slow start in the first quarter, and several very large UK residential portfolios were sold in the second half of the year. The overall 85 billion split was 47 billion of CRE and 38 billion in residential loan sales. Although residential accounted for 44% of total volume in 215, we anticipate CRE loans will account for a larger portion in 216. The average transaction size swelled by 25% to 924 million in 215, from 74 million in 214, signifying the accelerating pace at which lenders and asset management agencies are addressing legacy loans, and the high level of liquidity in the market for absorbing large loan trades. In 213, there were nine transactions with an unpaid balance (UPB) above 5 million, totalling 13.6 billion; this number grew to 33 transactions in 214, worth in aggregate more than 63 billion. In 215, there was 32 of these larger transactions with an UPB of 71 billion. 216 UPDATE CBRE Capital Advisors CBRE Limited 8

9 FIGURE 6: AVERAGE LOAN SALE TRANSACTION SIZE (UPB) The average increased as lenders deal with their books more quickly 1 9 Total Consideration ( million) Source: CBRE Capital Advisors US FIRMS ARE DOMINANT BUYERS US private equity funds continue to dominate distressed debt purchases. Private equity funds were involved in 81% of all loan trades in 215, even more than the 78% they bought in 214. Lenders in expansion phase are also becoming more active, acquiring 13% of 215 transactions. By face value, all 33 transactions over 5 million in 214 involved private equity buyers. In 215, 82% of the 32 larger transactions were private equity. Increasingly, competition amongst the leading players has intensified during 215 as the market share of the top five purchasers jumped from 25% in 213, to 66% in 214 and 68% in 215. Sales of residential loans are also increasing. Pure residential loan sales grew from 1 billion in 213 to 14 billion in 214, and to 38 billion in 215. Of this 38 billion, 85% was UK assets and 9% was Irish assets. We continue to see performing loans sold, often mixed in with NPL portfolios. Some 15% of 214 and 16% of 215 total activity represented either performing or a mixture of performing/npl loan pools. Investor appetite for NPLs remains high. In addition to loan portfolio sales, acquisitions of the entire lending, servicing, or real estate platforms have continued, indicative of the investors planned activities in the specific jurisdictions. Recent examples include private equity acquisitions of businesses in Spain, the Netherlands, Italy and UK. 216 UPDATE CBRE Capital Advisors CBRE Limited 9

10 FIGURE 7: TRANSACTIONS ABOVE 5 MILLION Average deal size was 484m in 213, 74m in 214 and 924m in Total Consideration (by UPB) Number of Transactions Number of Transactions ,45 7, Total Consideration ( bn) 5 7,29 13, Source: CBRE Capital Advisors FIGURE 8: TOP FIVE PURCHASERS, ANNUAL MARKET SHARE The top five accounted for 25% in 213, 66% in 214 and 68% in Total European Market Top 5 Purchasers Total Consideration ( bn) ,294 48,349 85,795 58, ,77 5, Source: CBRE Capital Advisors A further trend is consortium acquisitions. By UPB, 35% and 47% of all European NPL winning bids were from consortia, in 214 and 215 respectively. ITALIAN AND DUTCH DELEVERAGING BEGINS A big story in NPLs last year was that Italian deleveraging, which had been long anticipated, finally took off in 215. Italy posted 5.3 billion of CRE and residential loan trades last year which was 8.2 times growth on 214 ( 58 million) and 23 times greater than 213 levels. Although this is still low compared to more mature markets, such as the 216 UPDATE CBRE Capital Advisors CBRE Limited 1

11 UK which accounted for 48% of trades, Ireland (26%) and Spain (1%), we expect growth in transaction volume to accelerate. Italian banks gross NPL volumes reached 2.9 billion in December 215, one of the largest NPL exposures in Europe. The country s loan sale market is characterised by large pricing gaps between bid price and the banks write-offs, but this may start to change in 216. Additionally, the establishment of an Italian bad bank in 215, which holds circa 75 million of CRE NPLs previously held by four regional banks, is widely seen as the first step to addressing the problems of the Italian banking system. FIGURE 9: ITALY TRANSACTION VOLUME, ( ) 215 saw the start of Italy s widely-anticipated deleveraging story 6 CRE Residential 5 48 Total Consideration ( bn) ,97 1, Source: CBRE Capital Advisors However, although the newly-approved state guarantee scheme, GACS, is widely discussed, market participants are sceptical that this will be a solution to the large NPL overhang. This is largely due to the widening cost of the guarantee, the transfer costs on the banks to an SPV, and the imminent reforms to the enforcement legislation. In future, larger institutions might look towards more structured solutions to maximise value and credit recovery for their NPL portfolios. Loan sales have also been rising in the Netherlands which posted 2.2 billion of CRE and residential trades last year, 12% growth from 1.9 billion in 214 and 186% from two years prior. In Northern Europe, the Netherlands is on many investment firms radar, particularly due to its favourable insolvency regime. 216 UPDATE CBRE Capital Advisors CBRE Limited 11

12 The sale of Dutch bad bank Propertize s entire 5.5 billion book would present the largest opportunity in the country to date. Meanwhile, the distressed property assets market increased four fold over the past year and will continue to act as a channel for foreign investment. FIGURE 1: NETHERLANDS TRANSACTION VOLUME, ( ) Volumes have jumped since 213 with 2.2bn sold last year 2.5 CRE Residential 2. Total Consideration ( bn) ,43 1, Source: CBRE Capital Advisors On the other hand, activity in Germany and Spain appears to have decelerated. Spain, which accounted for 18% of total CRE and Residential loan sale transactions in 214, experienced a 34% decrease in closed transactions in 215 to 8.8 billion. 215 transactions are primarily characterised by residential (55% of all European residential loan transactions in 215), development loans, and land. Although large scale activity from SAREB may be stunted due to the newly implemented accounting rules, 216 may prove an active year for the Spanish NPL market as vendors outside the traditional four key vendors ramp up disposing of non-strategic assets, deals which continue to receive strong competition tension amongst bidders. Activity was very high in Germany in 213, but that was driven predominantly by international lenders. Such was the level of their activity that sales by international lenders of German loans accounted for nearly 3% of the European total in 213. Since then loan sales in Germany have slowed as German banks have continued to adopt a hold strategy for their local exposures. Activity in 215 amounted to 2.9 billion, 22% lower than 214 and only accounts for 3% of 215 s activity. Although ramped up deleveraging activity is not foreseeable in the near term, German lenders will likely have to begin disposal activity in the medium term as to achieve higher profitability. 216 UPDATE CBRE Capital Advisors CBRE Limited 12

13 FUTURE BUYER DEMAND IS STRONG In terms of loan buyer liquidity, there is an still an abundant supply of capital to deploy in the loan sales market. CBRE is currently tracking almost 76 billion ( 76.2 billion) of dry powder amongst loan purchasers across the globe, with a focus on European Investments. As one would expect, 91% of this capital is held by US-based investment managers, while 7% are UK-based and the remaining 2% consists of fund managers domiciled in Spain, Canada, France, Italy, Japan, and Cyprus. European loan purchasers across the globe, who are currently seeking capital, have fundraising targets totalling a further 7 billion. US-based fund managers are most actively fundraising (52%), followed by UK (45%) and German (3%) firms. There is a relatively large gap between the amount of capital spent in 215, and the amount of capital still to be deployed in the UK, Ireland, and Spain. Loan portfolios coming to the market in these jurisdictions are likely to garner most interest and competitive bidding from international loan buyers. Looking forward, as banks and asset management agencies in other countries such as the Netherlands and Italy accelerate their deleveraging programme and buyers get more comfortable with the countries economic recovery stories, we will see increased allocation towards these jurisdictions. FIGURE 11: CURRENT DRY POWDER BY FUND MANAGER DOMICILE Managers have 76bn to invest in loans globally, with most from the US US UK Cyprus Canada, Spain, France, Italy & Japan Others 7% 76 Billion 91% Source: CBRE Capital Advisors, Preqin 216 UPDATE CBRE Capital Advisors CBRE Limited 13

14 FIGURE 12: FUND MANAGERS CURRENTLY RAISING CAPITAL, BY DOMICILE US fund managers are the most active fund-raisers, followed by UK firms 4, Total Fundraising Target ( m) Capital ( m) 3,5 3, 2,5 2, 1,5 1, 3,695 3, US UK Germany Source:CBRE Capital Advisors, Preqin We are currently tracking almost 25 billion of on-market transactions and 7.4 billion of future sales in the pipeline for European banks, which have already been publicly announced for 216. UK live sales have shrunk from 23 billion in Q2 215 (concentrated in several large residential NPL portfolios) down to 9 million currently, just 2.5% of the total. Ireland still has a healthy pipeline of 1 billion, amounting to the largest share of 31% of on-market deals. Notably, a new wave of NPLs in the Netherlands has already FIGURE 13: TRANSACTIONS ON THE MARKET AND FUTURE PIPELINE The future pipeline is much more evenly spread between countries Ireland UK Spain 25% 31% Germany CEE Europe Netherlands Italy 18% 3% 5% 6% 9% 3% Source: CBRE Capital Advisors 216 UPDATE CBRE Capital Advisors CBRE Limited 14

15 hit the market in 216, mostly concentrated in the Propertize portfolio. And, as observed, 216 & 217 will mark the beginning of the long anticipated Italian deleveraging story, as banks take advantage of the high investor appetite for scale and diversified exposure in emerging markets. LOOKING AHEAD NPL sales remain an essential route to rehabilitation for Europe s banking system. However there is still a dichotomy between the cheap capital that is being provided to the banking system by central banks and the need to sell NPL positions to high cost of capital opportunity funds. In this context, the catalyst for further loan sales will inevitably be further legislation by banking regulators. There is continued recognition of the need to divest in NPL sales and in this context we expect the pace of loan sales to continue as momentum builds across Europe from regulators, governments and banks to reduce NPL levels. European banks are facing additional requirements to increase their capital reserves. At the same time, the pressure is racheting up on those of them with long-standing books of bad debt which are perceived to be holding back growth at a time when European economies dearly need it. Buyer demand and pricing for loan sales remain strong, with a good balance of buyer demand and seller supply currently maintained. However, given the relatively small number of buyers (with small transaction teams) for large NPL transactions, and the speed of capital raising by the US Opportunity funds, we could see a degree of market saturation start to affect pricing if, for example, there was a sudden uptick in loan sale supply. A PIVOTAL YEAR FOR THE NETHERLANDS The 5.5 billion Propertize portfolio is opening up the Dutch market after the Dutch government initiated a sales process at the beginning of this year. The bad bank s CRE, residential and real estate owned assets were acquired by the state via the nationalisation of SNS Bank after the crash. We view the Netherlands as a market ripe for further NPL sales in the short term, given buyer demand and the creditor friendly insolvency regime. ITALY TO BE A 217 STORY In Italy, the EU and Italy s central bank announced measures in January to tackle Italy s bad debt problem. This involves encouraging banks to offload loans by securitizing them and selling them to investors backed by a government guarantee (GACS). However, in its current form, we don t see the economics of the GACS substantially changing the market dynamics and forsee a further evolution of the scheme will be required. In any event it is likely to be changes to insolvency legislation that will be the real game changer in the Italian market. 216 UPDATE CBRE Capital Advisors CBRE Limited 15

16 Given these factors, we see many banks still deferring the decision to sell CRE loans where possible, and it may be 217 until there is greater clarity on the effect of both the GACS and insolvency regime changes and we see the market opening up. Meanwhile banks may prefer to concentrate on divesting unsecured lending books rather than take the losses that may be associated with the sale of CRE loan books. CREATIVE STRUCTURES WORK FOR NPLS Across Europe with bank cost of capital so low, we expect to see a rise in the number of more structured solutions to divest NPLS without sacrificing all the upside to private equity buyers. These creative solutions can have the benefit of getting the assets into the hands of the right owners and remain attractive to a number of the opportunity funds, providing an appropriate risk/reward-sharing solution can be found. We see this as a significant opportunity for those funds able to be flexible and understand the motivation of the selling banks. If correctly structured they can provide another tool to help the market evolve and move forward. LOWER RISK APPETITE TO AFFECT PRICING There are, however, changes in the wider real estate market which have the potential to affect future debt sales and its pricing. CBRE is seeing continued polarisation in performance between weak, capital-starved distressed assets and actively-managed real estate with well-capitalised and motivated owners. The period since mid-213 when investors became steadily prepared to take more risk appears to have slowed and since the end of 215 and the start of 216 we have seen attitudes altering. The context for this is more general than the real estate sector alone. Economic indicators for the UK and the USA have been more uncertain and globally stock markets have been very volatile. Investors have become concerned about the global outlook and this has rubbed off on the real estate sector, with some of the more conservative investors refocusing themselves on the prime market and the speed of transactions slowing down. 216 UPDATE CBRE Capital Advisors CBRE Limited 16

17 FIGURE 14: ATTITUDE TO RISK IN THE EMEA CRE MARKET What is your risk appetite for secondary assets compared to last year? % of Respondents Much higher Higher Same Lower Much lower Source: CBRE Capital Advisors In terms of property market indicators, changing investor attitudes were clearly evident in our investor intentions survey, carried out between 8 January and 4 February this year. In 214 nearly half (49%) of respondents said they had a higher appetite for risk than the previous year. In 215 this was still 4% of those surveyed. This year just 22% of those responding said that they had a higher appetite for risk. This change in sentiment will have a knock on effect on the debt market. The views on value and expectations of price between sellers and investors had narrowed last year in many markets but the spread is likely to widen again, particularly as the market becomes more balanced between buyers and sellers. Buyers of NPLs rely on underlying liquidity in secondary and tertiary real estate markets, and lower demand from direct investors for that type of product will impact their ability to work the loan books they are purchasing. Although high NPL volumes are often dilutive to return on equity for banks, they face larger losses as underlying property asset values weaken which will be crystallized if they decide to sell. At the same time, dry powder for loans and distressed assets is at record highs and fund raising is likely to further increase this in the short term. Demand for performing and non-performing loans is therefore more likely to hold firm although pricing is already adjusting, something lenders under pressure to sell may have to accept. The more medium-term outlook is less positive as funds move into disposal mode and US capital starts returning home. 216 UPDATE CBRE Capital Advisors CBRE Limited 17

18 The experience of the NPL market in the US in the 199s shows that private equity buyers need a range of solutions, including wholesale ones as well as discounted purchase offers and bespoke workouts for individual assets. The loan sale market may evolve into an intra private equity house one with a focus on trading sub portfolios. In H2 215 Cerberus did just that, transferring 4.5 billion of the 17.8 billion former Northern Rock book to TSB Bank, while Lone Star disposed of about 2 million of loans from Project Churchill which the PE firm bought from Aviva. CONCLUSION We see the pressure on Europe s banks to address long-standing non-core loan books as ensuring a high-level of opportunities for new and existing capital. Activity will inevitably decline in the UK and, after this year Ireland, but will increase in the Netherlands, Italy and other markets. There will be a continuing need for solutions to deal with the assets and retire legacy debt and secondary loan sale activity will pick up. Private equity buyers have enough dry powder for several years of investment. But the caution which lenders are showing in the new lending market and which partly accounts for the stabilising lending margins will be evident in a more defensive mind set across the board, and will act as a brake on growth in the size of the overall debt market. TECHNICAL NOTE CBRE s European CRE Debt Model is a bottom up estimation of the size and structure of the debt in Europe secured by commercial real estate investments. As such it does not intend to capture debt secured against residential property, development or lending to owner occupiers of commercial property. The outputs are driven by the underlying level of real estate investment transactions in the regions covered together with assumptions as to the amount and duration of lending that will have attached to those transactions. These assumptions are informed by debt market studies, such as those produced by DeMontfort University (UK) and IREBS (Germany) and our own experience of the operation of investors active in the European market. Over recent years assumptions relating to the refinancing (or roll over) of existing debt that matures is an increasingly important driver of the results of the model. Our model captures debt that is held by Private equity firms and other lenders and is not limited to the banking sector. The bottom up (rather than top down) nature of the model means that debt is identified against the country where the collateral is based rather than the lender and remains in the model even if the debt is sold to private equity or other investors in the debt market. However, loan-on-loan financing used by investors in real estate debt is not treated as additional real estate debt. 216 UPDATE CBRE Capital Advisors CBRE Limited 18

19 This report was prepared by the CBRE EMEA Research Team in conjunction with CBRE Capital Advisors. CBRE CAPITAL ADVISORS The CBRE EMEA Capital Advisors Team, of over 1 individuals, works with clients advising on financing options and the management, structuring or restructuring of real estate transactions. We provide performing and non-performing loan sale advisory services for individual, portfolio and structured loan transactions. We are in contact with over 1 active lenders across Europe which allows us to match our clients requirements to the most appropriate source of finance whether it be senior, junior, mezzanine or equity (or a combination of these products). CBRE GLOBAL RESEARCH AND CONSULTING The CBRE EMEA Research Team forms part of CBRE Global Research and Consulting a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe. For more information regarding this ViewPoint, please contact: EMEA RESEARCH Michael Haddock Senior Director EMEA Research and Consulting michael.haddock@cbre.com CBRE CAPITAL ADVISORS Paul Lewis Senior Director Capital Advisors paul.lewis@cbre.com Isra Erpaiboon Senior Analyst Capital Advisors isra.erpaiboon@cbre.com Disclaimer: CBRE Capital Advisors Limited is an appointed representative of CBRE Indirect Investment Services Limited with is authorised and regulated by the Financial Conduct Authority. Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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