Syndication deal volumes fall as investment market slows

The volume of syndicated commercial property loans in the UK and across Europe, the Middle East and Africa (EMEA) fell sharply in 2016, Dealogic data has revealed.

In the UK, the volume of deals slumped by 51% on 2015 to €11.6bn (£9.84bn), while in EMEA deal volumes fell by 39% year on year to €48.6bn.

Loan syndication, whereby lenders pool balance sheet capacity to participate jointly in large loans, has grown in popularity since the financial crisis as a way for banks to manage their balance sheet capacity and spread risk.

However, in 2016, the market was hit by the slowdown in the investment market and the fallout from the EU referendum result.

“We’ve seen a slowdown in investment transactions, so there are fewer loans to syndicate,” said Peter Cosmetatos, chief executive of CREFC Europe.

The number of large investment deals fell particularly sharply and those are the deals where the loans typically end up being syndicated.

In the UK, which remained the biggest national market in EMEA despite the slowdown with a 24% market share, Lloyds Banking Group led the Dealogic ranking by mandated lead arranger.

Across EMEA, ING topped the rankings by bookrunner and mandated lead arranger - while Bank of America Merrill Lynch, Credit Agricole and Natixis also featured highly across the EMEA rankings.

ING was involved in one of the most notable syndication deals in the UK market last year. In November, it syndicated with Landesbank Baden-Württemberg (LBBW) a £400m loan against Heron International’s Salesforce Tower, selling down more than £200m to a total of eight lenders.

The lenders included a number of Asian banks, six of which had not previously invested in the UK commercial real estate market.

The new entrants are understood to comprise three Taiwanese banks - Bank of Taiwan, Hua Nan Bank and Chang Hwa Bank - as well as the Agricultural Bank of China and a Korean and Japanese bank.

‘Attractive trophy assets’

London’s trophy assets remain particularly attractive to Asian investors,” said Howard Evans, head of European real estate finance at Sumitomo Mitsui Trust Bank, which has financed more than £1bn of central London assets over the past four years.

Jean-Maurice Elkouby, managing director of syndicated finance at ING, said that he hoped to see more lenders enter the syndication market.

“Attracting new capital to the sector will be vital given the headwinds the market faces in 2017 after a turbulent 2016,” he said.

Gregory Clerc, head of EMEA CRE debt distribution at Bank of America Merrill Lynch, added: “We are proud to feature strongly in these 2016 rankings, continuing our momentum as a key player in the EMEA CRE debt distribution market.

“Given macro geopolitical events in 2016 casting so much uncertainty into the market, it is not a surprise that total volumes for commercial real estate lending fell. However, the sector, as the league tables show, is becoming more transparent, and this openness will be key to attracting new investors looking for asset diversification going forward.”

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