European Market Update: New Developments in the London Office Segment
The office commercial real estate market continues to be inconsistent and unpredictable globally. On The TreppWire Podcast, the Trepp team has continued to speculate over the way the market will evolve once the effects of the pandemic wear off. Last week, we saw London office developments that reflected some of the speculations that Trepp has made.
In Episode 104 of The TreppWire Podcast, Trepp's Head of CRE Finance, Joe McBride, highlighted that in New York, in particular, newer, Class-A office buildings are doing relatively well and are attracting big tenants and leasing up large spaces, whereas some of the older, B and C-type buildings are having more trouble. Listen below.
Developments in the London Office Market
These trends could be moving across the Atlantic to Europe and the UK, and a recent headline from Europe Real Estate highlights just this. Lothbury Investment Management has reportedly secured planning permission to extend and alter the landmark office building in Mayfair in London. The plans include additional floors, a rooftop terrace, facade alterations, internal reconfigurations of some areas, all with the intention of "updating the building for the next stage of its life."
As highlighted on the podcast, those buildings that are newer and more modern appear to be doing better in terms of occupancy and performance. The development plan appears to be responding to this trend by updating for the "next stage."
On top of this, on a recent webinar with European DataWarehouse and Trepp, experts highlighted ESG trends in the CRE market and the need for "brown" buildings to become "green" buildings in order to meet ESG requirements.
Director at Lothbury Investment Management Limited Mark O'Mullane said that the "major refurbishment and extension will enable [them] to enhance the value and liquidity of [the asset], improving its sustainability credentials to achieve a BREAAM Excellent rating once complete."
European CMBS News
S&P Global Ratings has assigned preliminary credit ratings to Taurus 2021-5 UK DAC's class A, B, C, D, E, and F notes. The transaction is backed by £263.2 million of a £2.36 billion senior loan, which includes a £169 million capital expenditure (capex) facility.
Bank of America N.A., London Branch and three other lenders, originated the loan in February 2020 as part of the financing of Blackstone Inc.'s acquisition of iQ Student Accommodation (iQ), one of the U.K.'s largest student housing providers. The senior loan is secured by 43 purpose-built student accommodation (PBSA) properties totaling about 21,000 beds located throughout the U.K.
CRE CLO Issuance in the UK
Last week, Trepp reported on CRE CLO issuance in the UK. Over the past few months, rumors have circulated that commercial real estate collateralized loan obligations (CRE CLOs), a securitization that has seen record levels of issuance in the US in 2021, could be making their way to the European market.
Just a few weeks ago, those rumors rang true, and the first, broadly distributed, European CRE CLO transaction after the Great Financial Crisis was recently announced, Starz Mortgage Securities 2021-1 DAC.
The deal is a static CRE CLO securitization with the issuance of both GBP and EUR denominated notes. KBRA assigned preliminary ratings to ten tranches on 1st October. Read more on European CRE CLO Issuance.
CMBS Surveillance: Recent European Special Notices
Deal Name: TAURS 2018-1IT Loan Name: Bel Air Loan
Special Notice: On 15/Oct/2021 the Borrower and CBRE Loan Services Limited, as Loan Facility Agent, entered into a waiver and consent letter, whereby the Loan Facility Agent provided its consent to the disposal of and the partial release of the security granted over two small undeveloped areas of common use at the Borgogioioso Property; additional details provided in the 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.
Since establishing our London office over a decade ago, Trepp has modelled all European CMBS deals, and offers a rich data set that dates back to the origination of the CMBS market in Europe. With a staff dedicated to the European market, Trepp is acknowledged as the market leader in its analysis of bonds and generated cashflows.
Disclaimer: The information provided is based on information generally available to the public from sources believed to be reliable.