European Market Update: Investors Look to the London Office and Italian Hotel Markets

Hayley C

Recent headlines in Europe have been near consumed by questions surrounding the safety of the AstraZeneca vaccine. Several European countries temporarily suspended the distribution of the vaccine. Last Thursday, the European Union's drug regulator announced that the vaccine is "safe and effective," leading to many countries continuing their distribution.

As has been evident throughout the course of the COVID-19 pandemic, a successful, global, vaccine rollout is pivotal to the success of commercial real estate, especially for the office and hotel sectors. Since the start of the vaccine rollout, predictions for these spaces varied dramatically and the debate over the future of the office space and both business and leisure travel have been ongoing. In this piece, we outline investor behavior and predictions seen in the past few weeks.

Investors Look to the London Office Market

A poll by CBRE showed investors are beginning to put their faith back into the European office space. According to the investor survey, out of a group of 415 European real estate investors, more than a third chose office, just ahead of rental housing and warehouses.

The same survey found that London ranked as the top city for investors looking to spend money in Europe, citing that certainty around Brexit has "pumped a renewed confidence into the London market" and changed the mind of some investors.

This investor behavior furthers the debate surrounding the future of office... are these investors naïve to think that work from home is not the way forward, or are they onto a great thing with their predictions for the office space? Listen to Trepp experts discuss all sides of the argument on The TreppWire Podcast.

Italian Family-Owned Hotels See the Impact of COVID?

In 2020, hotel occupancy in Italy was reportedly nearly half its usual volume and currently around 90% of hotels are closed due to COVID. With new waves of the pandemic hitting the continent, these numbers are not predicted to go back to normal until 2023, according to Italian tourism agency ENIT, reported by Yahoo Finance

Some family-owned hotels have already seen the impact of these numbers, and have been forced to close their doors permanently, which investors have already jumped on. The 2023 prediction could mean more small hotels follow suit, with running costs outweighing the profit they could see in the next couple of years.

The article notes that international investors are watching these trends very closely and are intending to swoop in and benefit from these sales.

CLO Refinancing Reaches €14 Billion

In many of our previous European Market Updates, we have discussed the high volume of EU CLO refinancing and resets and these have only continued over the past few weeks.  Last week, the European CLO repricing surpassed €14 billion after the reset of a 2019 deal by Intermediate Capital Group (ICG).  The reinvestment has now been extended until April 2025, while the non call rolls out until July 2022.  

The deal, St Paul's CLO X is the second refinancing by ICG this month alone.  Early in March, the manager reportedly reset a 2016 deal, St Paul's CLO VI.

As mentioned in our CLO Market Round-Up, the best new execution in the EU CLO market last week was the €408.40 million Barings Euro CLO 2021-1, which featured a AAA class at E+80. The deal is managed by Barings and was arranged by Barclays. The European CLO Market last week also saw refinancing and reset volumes reach and surpass €14 billion.

CMBS Surveillance: Recent European Special Notices

  • 16/Mar/2021
    Deal Name: INTU SGS
    Special Notice: Issuer announces that the Obligor Security Trustee has received the required votes in favour of the STID Proposal and Issuer Proposal; documentation to give effect to the proposals approved in the STID Proposal and Issuer Proposal will be entered into by, inter alios, the Issuer and the Obligor Security Trustee as soon as practicable hereafter.
  • 16/Mar/2021
    Deal Name: INTULN
    Special Notice: Issuer is seeking approval of certain supplemental amendments to the master amendment agreement between, among others, the Issuer and the Borrower dated 29/Oct/2020 as supplemented on 29/Dec/2020, including the extension of the Existing Forbearance Period, and certain amendments to the intercompany loan agreement dated 20/Nov/2013 between, among others, the Issuer and the Borrower, as detailed in the Notice of Noteholder Extraordinary Resolution dated 16/Mar/2021.
  • 16/Mar/2021
    Deal Name: INTULN
    Special Notice: Notice of Noteholder Extraordinary Resolution; background and timetable details provided in notice.

The European Special Notices are originally published in our European Edition of TreppWire. If you are interested in seeing coverage of European Special Notices in your inbox every morning, click here.

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Disclaimer: The information provided is based on information generally available to the public from sources believed to be reliable. 


European Market Update: Investors Look to the London Office and Italian Hotel Markets