Banks are putting their faith in real estate with plans to launch more than €1bn (£770m) of CMBS bonds in the next three months.
The move by Bank of America Merrill Lynch, Deutsche Bank and Société Générale reflects growing investor confidence in real estate and demand for securitised debt, relative to other bond investments. This is being driven by ongoing risks in global equity and bond markets, which have been in turmoil since the start of the year.
French bank Société Générale is considering its first CMBS issue since 2007. The deal, which could be as large as £400m, would be secured against Apollo Global Management’s 22 UK Holiday Inns, which it bought from Lehman Brothers, GIC and Realstar for £630m last October.
Deutsche Bank is expected to be the most active of the three banks, with up to €500m of issuances secured against loans on real estate in Portugal and Ireland.
The Portuguese deal is secured against loans of close to €250m to Baupost and Blackstone. It will be the first issued using loans held against assets in the country this cycle, cementing the increasing faith in the security of Iberian real estate.
Deutsche’s second Irish issue since the downturn will be of a similar size.
BAML’s upcoming €300m securitisation is against loans made to Blackstone for the purchase the €470m Kingfisher portfolio of retail assets in Germany and the UK bought from Stenham Property last summer.
The revival in the CMBS market comes despite a difficult final quarter of 2015, when returning stability in bond markets made CMBS relatively expensive and investor demand thinned.
Bonds expected to come to market were subsequently held back on banks’ balance sheets in anticipation of investor appetite returning in 2016.
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