Sector’s dynamic changing as it’s weaned off leverage kicker
The current market is very attractive for real estate lenders, pointed out Nuveen head of European property research Stefan Wundrak.
“The margin has gone up obviously. The swap rate you can charge has gone up, so there’ are a lot more opportunities for alternative lenders, like Nuveen.”
And he pointed out that the equity side of the market has become more challenging. “If you’re refinancing you’re going to pay more than you used to, so on the equity side it’s quite challenging to engineer returns to the levels that investors are expecting,” Wundrak said.
“The industry got used to getting an extra kicker from quite modest leverage because financing was so cheap. The industry has to wean itself off that,” he added.
As equity participants adjust to a much diminished kicker from leverage, the market dynamic will shift markedly in favour of equity based investors rather than highly leveraged investors, Wundrak said.
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