CBRE reports on European Debt Market sentiment

09/03/2010

CB RICHARD ELLIS REPORTS IMPROVING SENTIMENT AMONG EUROPEAN BANKS IN LENDING FOR PRIME REAL ESTATE Latest European Capital Markets report identifies a positive shift in sentiment as banks vie for business 

London, February 2010

The recovery in prime real estate values and investment market turnover in the second half of 2009 has improved sentiment in the European debt markets, according to CB Richard Ellis(CBRE) latest Capital Markets Report .

In the report, CBRE assesses banks propensity to lend to the commercial property sector across Europe. Latest indicators reveal the first signs of a positive shift in sentiment amongst banks since early 2008, albeit heavily concentrated on the top end of the market.

Following the recovery in the European real estate investment market in the latter half of 2009, driven predominantly by increased appetite from equity buyers and an improvement in capital values, banks now find themselves in a more confident position to lend. This shift in sentiment has subsequently led to increased competition amongst debt providers to offer improved lending terms on loans secured against prime real estate.

Natale Giostra, Head of UK & EMEA Debt Advisory at CBRE Real Estate Finance, comments: “Key lending terms for prime real estate stock and credible tenants have improved significantly over the last couple of months. Maximum loan size is generally increasing, with maximum LTVs also on the increase at around 60-70% when secured on prime real estate, whilst margins have fallen across most markets.

“What is particularly worth noting is that this trend is not confined to the UK. We see a theme of consistency running throughout Europe, with Italy, the Netherlands and Spain also reporting an increase in maximum LTVs to 65-70%”

Key Lending Terms*: Top Quality Real Estate and Tenant, December 2009

Market            Max Loan Size     Max LTV       Margin**
France                €75 mil              60%         180 bps
Germany            €50 mil              60%          140 bps 
Italy                   €50 mil              65%         200 bps
Netherlands        €40 mil              70%         150 bps
Spain                 €50 mil              65%         250 bps
UK                     75 mil              70%         185 bps
Market trend     Increase           Increase    Decline trend

* New 5-year loan based on the maximum underwriting ability of a single lender;
** Margin over euribor/ libor swap

Despite the recovery in sentiment, debt market activity remains distinctly polarised mirroring the direct real estate investment market. Lending outside the prime segment of the market remains limited, most notably in respect of development finance, which continues to remain broadly unavailable in many markets. Those banks that are prepared to lend outside the prime real estate remit have employed more stringent financing terms, and margins are considerably higher.

About CB Richard Ellis CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the worlds largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 “best in class” company for three years in a row. Please visit our website at www.cbre.com.

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