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Debt capital markets continued to play an ever increasing role in providing liquidity to the real estate markets in 2016. The main drivers for this was a low yielding environment for alternative asset classes caused by loose monetary policy and ever-increasing regulatory capital environment for the traditional bank lenders.
In response, JCRA established itself in the debt capital markets in 2016 with both the acquisition of the bond advisory business of Canaccord Genuity and a collaboration with Peel Hunt, the independent corporate broking, advisory and trading house focused on UK mid and small caps. Peel Hunt produce an annual in-depth Debt Capital Markets review every year and the 2016 edition can be viewed here.
Mentioned in the review is a transaction for Delancey’s Alpha Plus private schools group (£80 million retail bond) which was one of the latest in a string of bonds for mid-cap and private companies that the team completed in 2016. Other bonds completed last year by the team include deals for CLS, buy to let lender Paragon and Burford Capital. The team also remains focused on residential housing of all tenure types, with a recent £40m Private Placement for MHS, an unregulated provider of affordable housing.
JCRA also remains very active in the commercial real estate market having completed five transactions for a total of c£350m in December alone. These included a £115m 15-year loan facility for Bruntwood and an £80m 12-year institutional loan for Empiric Student Property (being a tap of an initial £80m drawn earlier in the year). We also completed an additional £50m ultra-long dated private placement backed by residential ground rents. This is a sector where we have specialist skills and this latest transaction brings the total raised on this asset type to c£2bn in the last few years.
Throughout 2016, we continued to find funders who were able to meet specific needs of clients for all asset classes, including for those operating within the Office sector. For example, we recently worked with a global developer who needed a short-term facility to carry out a redevelopment of a central London office; we sourced a flexible funder who understood the strategy for the building. There were also funding solutions for other asset classes: we sourced and negotiated a ten-year facility with an Institutional funder removing refinancing risk whilst locking into an attractive gilt curve for a family estate needing to review their facility with their existing bank.
2017 will bring more volatility to markets, with elections due in Germany, France, Netherlands and Italy together with the Trump administration taking office in the US. However, we expect that debt capital markets will continue to play an important part in the real estate market because of the continued challenging environment for banks.
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