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CBRE: European CMBS pipeline for H2 looks steady and in line with 2018

According to CBRE, appetite was generally strong, though elements of some deals struggled “indicating slight investor wariness for selected markets and sectors – specifically, Italy and retail”.

Dominic Smith, Senior Director, Research at CBRE, explains:

“Interestingly, this concern was less in evidence in the corporate bond market: more than €4bn of bonds were issued by European REITs in Q2. Despite deep discounts on retail equity, very tight pricing was achieved by UnibailRodamco (1.75% on 30-year debt) and Klepierre (0.625% on 11-year debt).

“Generally, the European CMBS market remains active. Deals remain economically attractive to both sides, albeit that pricing is generally slightly wider than initial guidance, but still within expectations, as investors continue to exercise caution.

“The consensus among market participants is for a steady CMBS pipeline in the second half of 2019, in line with 2018.”

Investors continue to show caution, particularly in relation to jurisdictions or sectors where they perceive unwanted risk.Deutsche Bank arranged a €315.8m agency transaction for TPG Sixth Street Partners, ERNA, backed by four loans, three backed by Telecom Italia exchanges and the fourth by offices and warehouses used by Enel to maintain the electricity network.

While the A notes proceed at the tight end of guidance, B and C notes pricing is slightly wider than initially anticipated, said CBRE.

Significant caution was evident BAML’s second agency deal for Blackstone, the €222.32m Deco 2019-Vivaldi comprised of two loans secured by outlet retail centres, the Franciacorta Outlet Village and Palmanova Outlet Village. The transaction was originally launched with three loans but due to investor concerns one was excluded, as was the E note. Even so, the pricing of all tranches came wider than initial guidance.

Morgan Stanley placed two deals for Blackstone and M7 respectively. The £235.1m Scorpio (ELoC No. 34) is a single loan securitisation of 112 UK predominantly light industrial properties for Blackstone. The deal was well covered with only the split A note pricing widening from initial guidance. The €291m Eos (ELoC No. 35) is a single loan securitisation of office, industrial and retail properties in the Netherlands, Germany and Finland owned by M7. The deal was also well covered with pricing in line with expectations.

Goldman Sachs arranged the £268.6m Cold Finance CMBS, comprised of a single loan backed by 14 cold storage facilities across the UK operated by Lineage Logistics who are controlled by Bay Grove Capital. The transaction was well received by investors, in line with expectations.

HSBC placed Finance Ireland’s debut small loans CMBS, Pembroke Property Finance. The €222m transaction is backed by 139 Irish commercial real estate loans secured by 224 properties. The notes priced at a discount and were well received by investors.

CBRE’s H1 2019 European market analysis concludes tomorrow.

james.wallace@realassetmedia.com