Debt Round Table
Sousou Partners were delighted to host a roundtable discussion featuring well-respected experts in the European real estate debt space. Peter Field and Will Parker were joined by representatives of some of the largest alternative lenders and advisory firms who shared their thoughts on the sector.
General sentiment was that real estate remains a strong hedge against inflation, with GPs moving away from offering individual products to offering solutions, encompassing all aspects of the real estate capital stack. The outlook for European real estate, particularly the UK, was less optimistic, favouring an equity shift away from European real estate into US opportunities. High inflation, low growth, a lack of production and political uncertainty all paint a bleak future. However, the increased risk and volatility in the real estate equity market was viewed as favourable to European and UK debt as investors look to shift exposure lower down the capital stack to provide downside risk protection. This bodes well for both the new debt funds that have launched in the last 12 months and existing funds that have been in growth mode. The feeling is there is plenty of room for all of these firms, particularly as traditional lenders decrease their exposure.
Whilst interest rate rises may curb inflation, they may also cause suffering in the residential market as homeowners struggle to cover the increased costs of servicing mortgages. On the commercial side, the middle market is expected to suffer the most in the retail and hospitality sectors, as there is a bifurcation to high-end and low-end goods and services due to the cost-of-living crisis and widening income inequality. The office sector provides the greatest conundrum for lenders. It was widely felt that anything other than Class A stock (of which there is a shortage) was untouchable unless a significant amount of CapEx is to be put in to upgrade to meet current ESG guidelines.
We would like to thank everyone who was able to attend for their time and insights.