Challenges and Opportunities in European Real Estate Lending: Insights from IPE Real Estate Global Conference in Madrid
The lack of transactions among alternative real estate lenders in Europe was a hot topic of discussion at the IPE Real Estate Global Conference in Madrid, where industry experts gathered to address the issue head-on.
Moderator David White, head of real estate debt strategies for Europe at LaSalle Investment Management, highlighted the potential for investing in real estate lending and the returns that could be expected. However, the conversation kept circling back to the puzzling question of why European real debt volumes seemed to be struggling.
According to LaSalle’s estimates, a significant amount of capital has been allocated to real estate equity in Europe, but debt strategies are lagging behind. White emphasized that debt is under-allocated as an asset class within Europe, despite investor interest in increasing exposure to real estate debt.
Peter Hobbs, managing director at Bfinance, raised concerns about the lack of capital raised for real estate debt strategies, noting a significant decline in corporate debt capital raised for real estate in recent years. This decline is surprising given the attractiveness of real estate debt investments due to rising interest rates and the withdrawal of traditional lenders.
Brian Niles, co-CEO of Morgan Stanley Real Estate Investing, highlighted the importance of optionality in real estate investments, particularly in the current market environment. He emphasized the potential for positive returns in equity investments, especially as valuations adjust.
Jay Kwan, managing director at QuadReal Property Group, shared his experiences with real estate debt investments, noting both successes and challenges in a competitive market. He expressed a desire for more opportunities in the space, despite growing competition.
The panelists also discussed the factors keeping them awake at night, including geopolitical events and ESG issues. Nicole Lux, COO of Finloop, expressed concerns about funding for refurbishment and upgrading of properties, while Hobbs worried about the potential loss of confidence in real estate among institutional investors.
Overall, the panel discussion shed light on the complexities and challenges facing alternative real estate lenders in Europe, highlighting the need for increased capital allocation and strategic investment decisions in the evolving market landscape.