Conduits lead to new era in European CMBS
With banks more cautious about straight lending and bond spreads tight, real estate securitization through commercial mortgage backed securities is becoming increasingly popular, with conduit issuance taking a growing share of the market. Laurence Neville reports.
|Gilbert: The influx of conduit
issuers to CMBS is helping to
create a virtuous circle
The European commercial mortgage backed securities market is going through a period of huge change. It started in the mid-1990s and its annual issuance hovered around the €20 billion a year mark that it reached at the turn of the millennium. This year, though, issuance has already hit €18 billion, and is expected to reach €28 billion by year end. At the same time, competition is mounting as investment banks seize the opportunities available.
The market is split into three parts. The first involves property companies that use CMBS as an alternative form of debt funding, such as British Land's securitization of its Broadgate office development [see Borrowers of the Year section for more details, this issue], and corporates or government entities that use it for sale-and-leaseback deals, such as British Telecom, accounting for about two-thirds of issuance. For such issuers, CMBS is attractive because it is off-balance-sheet.