08/03/2021 | News release | Distributed by Public on 08/03/2021 05:14
Last week, Trepp hosted a webinar with European DataWarehouse to discuss the current state of the European CMBS and CLO markets. Experts highlighted trends surrounding ESG (Environmental, Social, and Governance) in the European commercial real estate (CRE) and CLO markets. Since then, we have seen further evidence of the growing signs in both markets.
It would also be amiss to not mention the way the pandemic continues to have an impact on global CRE. Most recently, many European countries have begun implementing 'vaccine passports' that require individuals to show proof of vaccination to travel to or enter many indoor public spaces.
Barcelona Office Emphasizes Growing ESG Trends
Last week, Henderson Park, the pan-European private equity real estate firm, and Hines, the international real estate firm, announced the start of construction on their T3 Diagonal Mar Building in North Barcelona. The building will measure 3,610 square meters and will be made entirely from wood and is scheduled for completion in 2022.
The company noted that the building is part of Hines' 'T3' family of buildings. The 'T3' category encompasses ESG criteria in commercial real estate, described as 'a new generation of offices built on three pillars: the warmth and sustainability of timber, superior transit connectivity, and cutting-edge technology.' Trepp has been publishing a three-part seriesregarding the importance of the 'E,' 'S,' and 'G' criteria in CRE globally. With the'E' referring to environmental priorities, 'S' referring to social awareness, and 'G' regarding governance (stay tuned for the third installment), the 'T3' family of buildings looks to cover each of these in some way.
The wooden construction choice falls into the 'E' category since the material has no embodied carbon, and is faster to build, creating less pollution, and no waste. The speedy construction also fits the build into the 'S' category since it offers less interference with local communities. On top of this, the structure will create a smart, sustainable, and healthy place that hopes to obtain 'LEED Gold, WELL, and WiredScore distinctions.' The build also makes clear attempts to align with the 'G' of ESG given its intention to meet the health and wellness needs of employees in a post-covid world by adding in an 'avant-garde garden' along with 'advanced technology, unparalleled amenities, and...[a] state-of-the-art space that meets the demands of modern occupiers.'
Developments such as this further emphasize the trends Trepp has been noting over the past 18 months, that ESG in CREglobally is here to stay, and we anticipate further growth in the coming months and years. In fact, last week, Trepp hosted a webinar with European Data Warehouse in which experts highlighted the growing trend and the way it has been seen impacting structured finance and commercial real estate over Europe. Stay tuned for more highlights from this webinar.
Barings ESG Compliant CLO
As Trepp's own Taranjeet Chumber highlighted in the recent Trepp x EDW Webinar, ESG initiatives are not limited to the commercial real estate space, and Trepp has seen a growing CLO market with more and more deals containing ESG criteria.
Most recently, last week, Barings became the latest to include sustainability criteria in its second European CLO dealof the year. The deal includes language related to the Sustainable Finance Disclosure Regulation. These regulations set out new 'harmonized disclosure requirements' including;
Morgan Stanley arranged the €405.6 million CLO named Barings Euro CLO 2021-1,which ends its reinvestment in March 2026 and non-call in March 2023.
The CLO's triple As are split into pari-passu loan. Barings priced Barings Euro CLO 2021-1 in March via Barclays. It takes July's European CLO new issuance total of just over €3.5 billion across eight deals.
Vaccine Passports Have Growing Influence in Europe
Forbes recently highlighted the growing use of 'vaccine passports' in travel destinations all over Europe. These passports require individuals to obtain and provide proof of vaccination status for a wide array of activities, including staying in hotels, dining at restaurants, and visiting museums - crucial activities for tourists.
Some places included in this list are:
Similar rules are also in place in Germany, Spain, Portugal, Austria, Belgium, Italy, and more. So, why do these restrictions impact the commercial real estate market? Much of Europe's commercial real estate space has struggled throughout the pandemic, a trend that has been paralleled all over the globe in the past 18 months. The easing of restrictions in many countries across the continent offered hope to retail, lodging, and many other sectors that foreign travel would increase, meaning businesses could return to (relative) normal.
A return of income when eviction moratoriums are beginning to near their end dates globally is imperative to the successful payment of rent, loans, and tenant/landlord relationships.
Over the past year, Trepp has monitored the way government regulations related to the coronavirus pandemic have had an impact on the industry. While 'vaccine passports' do not appear to have as direct an impact as regulations such as the eviction moratorium, they will certainly influence travel within the continent. what exactly this impact is - whether positive or negative - remains to be seen and Trepp will continue to monitor industry trends seen as a result.
CMBS Surveillance: Recent European Special Notices
Trepp is acknowledged as the market leader in providing data and analytics to the CMBS, CRE & CLO markets. Trepp's European Headquarters, located in central London, has teams focused on European data, modelling, and content within all three asset classes.
Disclaimer: The information provided is based on information generally available to the public from sources believed to be reliable.