Moody's Investors Service predicted CMBS growth in 2007 in the EMEA market at its investor briefing held May 10 in London. Analysts at the ratings agency said the market is diversifying as more pan-European deals become intertwined with CMBS in Africa and the Middle East.
As the geography between deals grows, so will the diversity of EMEA CMBS. "There are more and more loans emerging from countries like Spain, France, Italy and Portugal that are included in pan-European conduits," said Christian Aufsatz, a senior analyst of structured finance at the firm. "Both Deutsche Bank and ABN Amro have origination teams taking loans from the Middle East and Africa and bundling them into one transaction in a Pan-European conduit." Conduit programs like those of Deutsche Bank or Credit Suisse have origination teams across Europe, Aufsatz added.
Team managing director Daniel Kolter pointed out that CMBS in the more traditionally performing markets, such as Germany and the U.K., are continuing to grow, with a 60% rise in issuance, equal to a quadruple in volume in the German market alone. France and Italy are also expected to grow.
One of the major areas of growth will be in office properties, especially in Barcelona and Amsterdam, as well as with real estate used for retail space. "The supply and demand in these properties is in fairly good balance," Kolter said. This will help to balance the loss of residential-related CMBS that is expected to fall from 23% of CMBS deal in 2006 to 12.6%.
Tad Philipp, another team managing director over from Moody's U.S. CMBS team, specifically mentioned that the U.S. hedge fund community had its eye on capital markets in Europe, hinting that the market will continue to shift closer to American CMBS methods. And more players in the game will mean an increased number of games to be played in Europe, but Philipp was quick to clarify that hedge fund CMBS structuring was still in its infancy in Europe. "For hedge funds and CDO construction loans," Philipp said, as an example, "there are three to four deals in Europe, and 120 in the U.S."
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