The PERE Europe Forum 2023 in London saw more than 300 private equity real estate investors, fund managers, developers and strategic partners come together to discuss the current trends shaping private real estate.
Among the attendees was Michael Zerda, LaSalle’s co-chief investment officer and head of debt and value-add strategies for Europe. In a PERE Network podcast, recorded at the forum, Zerda said he had never seen a lending environment in real estate as compelling as it is today. Coming from an industry veteran with over two decades’ experience, this is a significant observation.
“Really this is the goldilocks conditions that the market is presenting for alternative credit lenders, which include retrenchment by banks, pullback from mainstream capital providers, higher interest rates – which if you’re lending in a floating rate environment you’re benefiting from that higher base rate – and more selection of the underlying borrower and the sectors you want to lend on,” he said.
He further argued that the combination of all those factors has created an interesting environment for alternative lenders and one in which they can thrive.
The conversation also highlighted refinancings as an area of opportunity. “What we are seeing today is a lot more refinancings,” said Zerda. “In Q1 of last year, we probably only saw around 30 percent of our dealflow as refinancings. Today, it’s close to 70 percent of refinancings. So, there’s a large opportunity set within refinancing.”