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CRE Finance World, Winter 2014

A publication of Winter issue 2014 sponsored by CRE Finance World Winter 2014 63 Compared to North America, the European lending market has traditionally been dominated by banks. Over three quarters of lending in Europe has been provided by commercial banks. Commercial banks in North America make-up around half of lending, with nonbanks, notably life insurers accounting for up to 20% or more, with a similar proportion from CMBS (Exhibit 4). Lending from insurers has been limited to just a handful of lenders across Europe and their share has to date been relatively small, albeit growing. The emergence of non-bank lenders in Europe reflects a broader range of lenders, including the arrival of US insurers such as TIAA CREF and Mass Mutual (Cornerstone). Some European insurers such as AXA, Allianz and Aviva are also stepping up their CRE lending. Most recently the Norges Bank Investment Management, the Norwegian sovereign wealth fund has teamed up with AXA to lend against real estate in loans of up to EUR600m. Sales of both performing and non-performing loans has also led to the entry of private equity funds, with other new funds seeking to raise for both senior and junior lending. As a result non-banks’ share has risen to 2% in Europe and an even higher 7% share in the UK. Exhibit 4 Outstanding Debt by Lender Type, YE 2012 Source: DTZ Research We have analysed the various insurance companies, institutions and funds that have or are currently raising equity for the purpose of lending. This analysis is based on either conversations with lenders or based on their stated targets. Overall we currently estimate there to be USD180bn available over 2013-15 (Exhibit 5). When compared with our earlier estimates we have seen a reduction in capacity for 2013, largely reflecting the struggle some funds have had in initially raising equity. Going forward we see an increase in capacity reflecting both new entrants and delays in raising by some funds. We see lending dominated by insurance companies and other institutions representing around two-thirds of current activity, although expectations of funds gearing up their lending programmes should see their share grow to half of lending capacity by 2015. Exhibit 5 Lending Capacity from Non-bank Lenders, USD bn Source: DTZ Research Non-Bank Lenders Shrink Gap, with Surplus Capacity in Core Markets In assessing the impact of non-bank lenders on the gross debt funding gap, we have considered their impact at the country level. We see the focus on new lending capacity towards core markets, notably the UK, France and Germany. In these markets lending capacity from non-bank lenders is greater than the gross debt funding gap, leading to a surplus capacity (Exhibit 6). We also see a modest surplus in other markets including Sweden. Europe Progresses in Debt Workout


CRE Finance World, Winter 2014
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