Attractive pricing and terms available via different kind of lenders and instruments -CBRE´s debt & structured finance expert Anne Laukia provides a brief overview of the real estate debt financing in the Nordics.
Balance sheet lender & stable cash flow is a twosome
Assets with stable cash flows continue to work with the key banks in the region, i.e. prime assets and portfolios in logistics, residential, social infrastructure and office segments are seeing lively competition between the lenders and pricing and LTV levels are reaching pre-covid levels. However, there is a significant amount of headwind in development financing and the hospitality and retail sectors. The third quarter results of the Nordic banks have been relatively solid and stable, even though, the second wave of covid-19 makes forecasting challenging . Some of the Nordic banks have been more eager to lend, e.g. Nordea has been clearly increasing its market share especially in mortgages and corporate banking in Finland.
New alternative lenders seeing daylight and existing ones gaining ground
In the Finnish market, we currently have two new debt funds making a market debut. The existing debt funds have also remained active in real estate financing, as well as the challenger banks and the insurance companies. This is very supportive to the lending market and borrowers, when the increasing number of active lenders can finance a more diverse set of companies and projects.
In the Nordics bond markets are not only for the listed and rated companies
The bond markets continue to offer interesting financing opportunities for real estate investors and the recent issues demonstrate the market to function well. In the Investment Grade universe, Sato Oyj (BBB), a Finnish residential investor, issued a EUR 350m and 6y green bond with an annual fixed coupon of 1.365% in September. Tornator, one of the largest forest owners in Finland, issued an unrated green bond in October with the following key parameters: EUR 350m, 6y and a fixed coupon of 1.25% p.a.
Secondary market spreads in retail segment are still wider (some 200 bps) than in March 2020, even though, there have been new issues in the primary market. In the Nordics bonds can offer financing also for smaller needs (min. size around EUR 25m) and also for development financing. In development financing it is important that the project is prudently planned (construction firm selection in the progress) and backed by a solid sponsor.
Conclusion: How to get strong traction from lenders
In the current market environment, the business plans and presentations need to be well prepared and considered in order to achieve attractive pricing and terms and get the positive traction from a variety of different lenders currently monitoring the market in the Nordics.
Need help with debt financing? Would like to discuss further? Don´t hesitate to contact Anne.
In case you missed the previous article written by Anne: Real Estate Lending Market – Current State & Outlook