A new article from the Wall Street Journal titled CMBS Make a Comeback in Europe examines how the commercial mortgage-backed securities market recovery in the United States is having an impact on the European market as some of the biggest US originators are ramping up European deals. While deal volume is still below pre-crisis levels, there have been seven new European CMBS issues this year worth €2.57 billion ($3.2 billion), according to data firm Trepp LLC, compared with €47.3 billion in the peak year of 2006. An excerpt follows:
In Europe, after a limited number of deals in 2012, the CMBS market slowly restarted in 2013, but was dominated by refinancing of multifamily portfolios. Last year, about €7.2 billion of CMBS was issued, but almost all of that was from the refinancing of three large German residential portfolios, according to Trepp.
"The predominance of German multifamily in new securitization at the beginning of 2013 was significant," said Patrizia Pirinoli, CMBS analyst at Goldstar Research Ltd. Most issues, she added "stemmed also from previous securitizations."
The recovery of Europe's CMBS market is partly due to work by a trade organization, the Commercial Real Estate Finance Council, which issued new guidelines for the securities in Europe, so-called CMBS 2.0. The guidelines are meant to guarantee to investors "more transparency, more access to the underlying documents," said Charles Roberts, a partner at Paul Hastings.
Many of the deals this year have been more complex than simple refinancing. Some have provided debt to borrowers to finance new acquisitions and others involved multiple loans. For example, Goldman Sachs completed two CMBS originations backed by loans on Italian portfolios owned respectively by Blackstone Group and Morgan Stanley.
Deutsche Bank has been a leading player in Europe this year. For example, in October, together with Crédit Agricole CIB, it sold a £750 million ($1.18 billion) CMBS issue to refinance the Westfield Stratford City shopping center in London. This year, Deutsche Bank also underwrote the first postcrisis multiborrower CMBS in Europe backed by two loans on retail and office buildings across the Netherlands.
Markus Kreuter, director for CRE origination at Deutsche Bank, confirmed that Deutsche Bank expects more deals and added France, Benelux and Spain among the markets that might see more CMBS activity next year. Italy is another market where, in the lights of Italian banks' negative results to the European Central Bank's stress tests, CMBS "is a product that can bring liquidity," said Mr. Kreuter.
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