In the years since the Global Financial Crisis, the role played by non-bank lenders in European CRE finance markets has increased significantly, as a result of a number of factors.
- Many banks have narrowed and/or reduced their appetite for CRE exposure, with the result that many real estate investors find it difficult to secure finance from that traditional source.
- In the extraordinary monetary and macroeconomic conditions that have followed the GFC, large amounts of fixed income capital has been attracted by the risk/return combination offered not only by real estate, but specifically too by real estate debt.
- The hostile environment created by European regulators for CMBS, notably for insurers subject to the standard formula for the solvency capital requirement (SCR) under Solvency II, has led to many firms setting up their own lending platforms or allocating capital to third party managers.
While there is undoubtedly some fuzziness around the edges of the “alternative lenders” universe, it seems clear that this part of the market is structurally important, adding diversity and resilience from a financial stability perspective, as well as choice and competition for real estate investors and debt investors alike.
We are keen to support this new sector, which is well represented in our membership, helping it acquire a clearer sense of coherence and identity both internally and for the key external stakeholder groups of borrowers, debt investors and regulators. We are doing this both through an independent CREFC Europe initiative led by David Dahan, and through collaboration with INREV (with whom we co-organised a debt funds breakfast in November 2018).