The Europeans are coming: Continental banks double down on CRE lending

Natixis, Deutsche Bank among active firms

European banks are doubling down on real estate lending, and a growing chunk of the money is flowing into the U.S.

“We have capital and we have appetite,” Deutsche Bank’s head of commercial real estate Roman Kogan told the Wall Street Journal. As of September, German banks held $24 billion in U.S. commercial mortgages on their books, according to Trepp, up from $14 billion a year earlier.

French lender Natixis, meanwhile, has emerged as one of the most active property lenders in the U.S. and recently issued a $480 million construction loan for a development in Boston’s Seaport district.

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In The Real Deal’s January 2018 ranking of the top 15 construction lenders in New York City, Deutsche placed first with $2.67 billion in dollar volume across nine deals between October 2016 and September 2017.

Banks are issuing more loans in part because Europe’s economy is booming, and in part because post-crisis regulations are loosening. Spain’s Bankia, for example, saw barred from issuing certain types of mortgages following its government bailout in 2012. But now the prohibition has lapsed, and the lender plans to finance construction projects in Spain again.

“It’s a good time to be in the sector; in terms of growth, the cycle still has upside,” Alberto Manrique, who heads Bankia’s construction financing division, told the Journal.

But the uptick in lending comes amid fears that a bubble is building in Europe’s property market. European Central Bank president Mario Draghi in February voiced concern over the market. “We actually see stretched valuations,” he said. [WSJ] Konrad Putzier