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2021 is so far proving to be a stellar year for European CMBS, and if the current momentum continues 2021 will go down as a truly bumper year for the product. Like many other financial transactions, despite a promising start to 2020, CMBS certainly ended up having a torrid ride on the primary issuance front. This is a far cry from the first half of this year which has proven to be anything but sluggish! Notable transactions that have so far taken place or are in the process of being marketed include the following:
- Last Mile Logistics Pan Euro Finance – c.€510m transaction secured by last mile logistics properties located in Germany, the Netherlands, France, Spain, Ireland and Denmark.
- Agora Securities UK 2021 – c.£211m transaction secured by retail properties located in the United Kingdom.
- Bruegel 2021 – c. €220m transaction secured by office, hotel and retail properties located in the Netherlands.
- Berg Finance 2021 – c. €295m transaction secured by office properties located in the Netherlands, France, Austria, Finland and Germany.
- Last Mile Securities – PE 2021 – c. €373m transaction secured by light industrial properties located in the Netherlands and Germany.
- Taurus 2021-3 DEU – c.€512m transaction secured by the Squaire office and hotel property located in Frankfurt.
- Taurus 2021-2 SP – c. €132m transaction secured by office properties located in Spain.
- Taurus 2021-1 UK – c.£320m transaction secured by last mile logistics properties located in the UK.
Taken together these transactions provide the firmest indicator yet that that the beleaguered CMBS product is firmly back in vogue.
The inflection point for the latest surge in activity can be said to stem from the hugely successful hat trick of Taurus transactions at the height of winter (and in quick succession) which really kick-started the 2021 CMBS party. Not only did these deals breathe fresh life into an otherwise subdued market but the pricing achieved provided market participants with a very stark reminder that with the requisite macro-economic conditions and a healthy dose of investor demand, CMBS can be the golden ticket. The spate of deals that have since followed not only re-affirm and endorse this message, but in fact positively demonstrate that CMBS not only has a role in financing European commercial real estate but that it can be extremely profitable for those market participants (borrowers, arrangers and fixed income investors alike) that wish to embrace this technology.
The great news about this recent surge in activity, is not only the fact that a number of different arrangers are sitting behind these issuances but also the fact that these transactions feature different underlying asset types from a range of jurisdictions. However from our standpoint what is most encouraging about this recent spate of activity, is the fact that European CMBS is making this resurgence notwithstanding the unprecedented pressure that the pandemic has applied to existing CMBS structures. The fact that CMBS 2.0 has managed to weather the worst of the pandemic can be regarded as a ringing endorsement for the asset class.
For the erstwhile industry participant, this is not the first time that we have had the pleasure of riding a CMBS 2.0 wave. 2015 was proving to be an extremely prosperous year until the summer when the threat of Grexit followed by the Chinese financial crisis brought primary issuance to an unexpected crashing halt. Similarly, the same could be said to be true at the beginning of last year until the pandemic struck. Although a sobering thought that the market will only be too aware of, it is nevertheless our hope that arrangers continue to “make hay while the sun is shining”, that CMBS truly prospers and that ultimately we will witness the development of a deep and mature CMBS market.
To discuss European CMBS further, please contact the author, Iain Balkwill.