is the largest ever dedicated to Asia real estate, according to Ken
Caplan, global co-head of Blackstone Real Estate.
Separately, Blackstone also revealed that it held its final close
on its first Asian private equity fund, Blackstone Capital Partners
Asia, reaching its hard cap of approximately $2.3 billion of capital commitments. Coupled with Blackstone’s global buyout
fund, this gives the firm a minimum of $3.8 billion worth equity
to invest in the Asian property markets.
Another fund with global aspirations is Starwood Global
Opportunity Fund XI, a $7.6 billion pot that closed in March of
this year and that will target distressed, opportunistic and value-add assets in North America and Europe. Among its investments
to date: the privatization of Milestone, a multifamily REIT listed
on the Toronto Stock Exchange that owned 79 communities in
the Sunbelt and Western US.
Funds with an eye on cross-border investment financing are
originating from other markets as well. This past spring,
Singapore-based industrial giant GLP stepped out of its comfort
zone in real estate with the launch of a $1.6-billion fund aimed at
modern logistics facilities and tech solutions for the space. The
Hidden Hill Modern Logistics Private Equity Fund will be the
only fund in China dedicated to investing in the logistics ecosystem, according to GLP.
DEBT ISSUANCE SWELLS ON BOTH SIDES OF ATLANTIC
The CMBS markets are also doing well on both sides of the
Atlantic as issuance grows year over year. The European CMBS
market “has had a storming year”, following two years of relative
malaise in primary issuance, according to analysis from Mondaq,
a global information provider.
Among the notable transactions that have taken place so far:
Citibank and Morgan Stanley closed a jointly-securitized loan to
Blackstone to refinance a portfolio of Finnish assets it inherited
via its acquisition of listed Finnish real estate company Sponda.
The structure and nuances of the
deal made it “a CMBS 2.0 first,”
according to Mondaq.
Indeed, the environment on
the Continent has been favorable
to such deals. “The economics of
CMBS issuance in Europe are
now the most compelling in over
a decade,” wrote Deutsche Bank
analyst Paul Heaton in a note earlier this year, per CoStar UK.
The CMBS market stateside is
also tracking better year to date
compared to the same period
the previous year, according to
Morningstar’s Market Outlook.
Issuance started strong in 2018 and analysts expect this
momentum to continue until at least the third quarter of 2018.
Citing figures by Trepp, Morningstar reports that by the end of
June, new issuance totaled $44.3 billion, compared to the
$34.45 billion issued during the first six months of 2017.
Driving the activity has been issuance volume for single-asset,
US CLOs BRING MORE LIQUIDITY
single-borrower CMBS, which has been fueled by deals on trophy
skyscrapers in major cities. According to Trepp, SASB issuance
will total $18.06 billion by the end of the second quarter, up dra-
matically from the $11.88 billion that was issued during the same
period a year ago. So far, office loans account for the largest share
(29%) of that total, with $4.48 billion in issuance so far this year.
Meanwhile, other parts of the US debt markets are showing
signs of revitalization, promising to add even more liquidity to
the market. Earlier this Spring Kroll Bond Rating Agency
assigned preliminary ratings to a CRE collateralized loan obligation that LoanCore Capital Markets was taking to the market.
It was backed by an eye-popping $1.1 billion in first mortgages
secured by a mix of 33 multifamily, office, mixed-use, industrial, hospitality and retail assets. These CLOs re-emerged from
their hiatus about two years ago, but the size of this one
brought some observers up short.
The CRE CLO market, it had suddenly become clear with the
LoanCore transaction, was back.
This is not to say that CRE CLOs are anywhere close to their
pre-recession heyday. In 2007 and 2008 issuance was around $35
billion a year. The first vehicles to remerge after the financial
crisis were in 2016, when CLO issuance totaled between $2 billion and $2.5 billion of CLOs were issued, according to stats
from Wall Street investment banks. That figure rose to around
$8 billion in 2017 and it’s estimated that issuance will close out
this year at between $13 billion and $18 billion.
Ultimately for end-borrowers, a more robust—or to be more
precise, a re-emerging CLO market—means more liquidity,
especially for flexible and bridge loans.
Investors as well are welcoming the advance of CRE CLOs,
relates Joseph Iacono, chief executive officer and managing
partner with Crescit Capital Strategies. That is particularly true
for those that look for assets with shorter-duration holds.
“They like the idea that they are floating rate as opposed to a
fixed-rate bond,” Iacono says. And in general, investors have
become more comfortable with the vehicle because of the transparency and collateral. “If you’re an investor that likes to look at
and touch, so to speak, the underlying collateral supporting an
investment, there’s a lot more visibility.” That’s a quality that
appeals to foreign and domestic investors alike. ◆
“Few US companies are financing
development in the Caribbean or
Mexico. Those projects are usually
financed through local banks.”
JAVIER COLL, APPLE LEISURE GROUP