Crediting the role and purpose of non-bank Debt Paper lenders to commercial real estate debt markets

Non-bank lenders as an integral component of the European commercial real estate debt market’’ is the latest paper in INREV’s research series on the European non-listed real estate funds. This paper examines the structural evolution of non-bank lenders (NBLs) in the European commercial real estate (CRE) debt market. Emerging in the aftermath of the global financial crisis, NBLs have expanded in scale, scope and purpose to become a durable component of the European CRE lending ecosystem.

Key highlights:

• Ultimately, NBLs have evolved to become a durable and integrated component of real estate capital markets. Their role is not merely as an alternative lending source.
• NBLs and banks operate interdependently. Banks remain the dominant source of senior loan origination, while NBLs focus on the provision of development, transitional and whole loan finance. Although they are competitors at points on the risk curve, they also collaborate where their activity is symbiotic.
• Regulation remains a primary driver of European CRE debt markets and NBL opportunity.
• Alongside traditional intercreditor and syndication arrangements, the growth of back leverage structures has become a defining feature of the sector. While these provide capital efficiency for banks, NBLs and borrowers, they also introduce new layers of complexity and risk.