The European real estate market continues to boom, and the capital markets are busy fuelling the frenzy. From financing private equity-backed M&A through lending to feed hungry CMBS conduits, bankers are working hard to fund the growth of property companies and meet the demand from investors for new product. As an important feature of the current environment, real estate investment trusts (REITs) – the tax exempt vehicles that started life in the US in the 1960s – continue their relentless s

The most optimistic projections estimate that the global commercial property derivatives markets will total US$150bn by 2011. A big portion of this growth estimate is predicated on the fact that the US commercial property market is 26 times the size of the UK physical market, so when the US property derivatives market’s development catches up with that in the UK, the global property derivatives market should get a huge boost. Little actual trading has occurred in the US commercial property deriv

Russian mortgage lending more than doubled last year. Average prices per square metre for new-built flats have tripled since the start of 2002. Housing stock in some towns increased by more than 10% last year. The government has made building new homes a key strategic goal. In a word, the country’s property sector is booming. The State Mortgage Agency, according to media reports, is itself planning a securitisation deal with Citigroup as lead manager. It estimates stellar growth in levels of mor

According to Christoph Anhamm, chief covered bond and ABS strategist at ABN AMRO, the approach adopted by the issuing institution under Basel II is not the main determinant of whether it is more attractive to issue RMBS or covered bonds. He argues that to assess capital requirements and commensurate risk weightings it is the approach taken by investors that will be the ultimate driver. "It depends on what investors you have and the extent to which they are Basel II sensitive. This is essentially

Attracted by a prolonged period of low credit spreads and relatively minimal defaults in the credit market, real estate investors are eyeing the commercial real estate (CRE) CDO market, and in doing so are becoming ever more sophisticated in their search for yield. According to analysts at Dresdner Kleinwort, it is these factors that have raised investor awareness of speculative-grade property instruments as a way to boost returns. As has long been evident in the US market, CRE CDOs can offer a

Real estate financing volumes in the European and Middle East syndicated loan market have grown exponentially over the past four years. According to data from Thomson Financial, EMEA real estate-linked volumes in 2005 were close to US$27bn, up from under US$2bn just four years prior (see graphic). And given that B loans and mezzanine loans support most property securitisations, bankers estimate the true size of the market at US$80bn–$90bn, and still expanding rapidly. "The first quarter of 2007

The trendsetter in the UK non-conforming (NC) RMBS sector has undoubtedly been Lehman Brothers. Its ownership of three originators – Southern Pacific Mortgages, Preferred Mortgages and the London Mortgage Company – provides the firm with extraordinary origination and securitisation capabilities. To date Lehman's three UK mortgage companies have securitised about £15bn of loans in 39 transactions. Despite its dominant position, Lehman has worked to secure fresh origination capabilities by sealing

When private equity was developing as an asset class, funds generally steered clear of investing in real estate. It was seen as a more difficult asset than industrial companies to mould and transform, and one that would not bring returns as high as those available in other sectors. But in recent years the trend began in Europe to separate the property assets from the operating business in sectors such as healthcare and retail. This coincided with the long boom in property values. “Separating the

The real estate investment trust (REIT) has been one of the fastest growing investment phenomena of recent years. The concept of a tax-efficient investment vehicle for the property sector – whereby the vehicle is tax-exempt provided that it passes through almost all its cashflow to investors – had its origins in 1960s America, before spreading across the world. This spread has been most notable in Asia, where the structure has been taken up in various forms in markets including Japan, Australia,

M&A is a big driver in the European real estate finance market, and as the deals become bigger, banks are lining up ever larger financing solutions to back them. In many cases, the funding is lined up months ahead of the moment that the bidding consortium decides to go ahead. In this environment, the focus is on a bank's ability to use its balance sheet for what Amanda Thomson, an MD in securitisation at Citigroup, calls "enlightened risk taking". "If you can you warehouse M&A-derived positions,