CPI Property Group SA secured €494 million ($539 million) in new bank loans offering a glimmer of hope for cash-strapped landlords seeking alternatives to bond markets, which are all but closed to the sector.
(Bloomberg) — CPI Property Group SA secured €494 million ($539 million) in new bank loans offering a glimmer of hope for cash-strapped landlords seeking alternatives to bond markets, which are all but closed to the sector.
In a sign that some lenders are willing to step into the breach despite the turmoil in property markets, CPI — owned by Czech billionaire Radovan Vitek — obtained funding from Aareal Bank AG, Erste Bank AG’s Czech unit CSOB and Raiffeisen Bank International AG, according to a statement Monday. The loans are secured against properties in Warsaw, the Czech Republic and Slovakia.
“Almost any new or replacement funding is seen as positive,” said Tolu Alamutu, a Bloomberg Intelligence analyst. CPI’s use of secured, rather than unsecured funding, “is becoming something of a theme in the sector.”
The loans represent a pivot for CPI, which hired former Deutsche Bank AG executive David Greenbaum as chief financial officer in 2018. He spearheaded the company’s debt issuance at a time when borrowing through the bond market was far cheaper than bank loans, thanks in part to the European Central Bank’s asset-purchasing program.
After a series of rapid rate hikes, landlords now face a financing crunch and more than $190 billion of property bonds and loans are trading at distressed prices, Bloomberg News reported last month. New issuance by real estate companies has dried up, leaving landlords dependent on banks or forcing them to sell assets into an uncertain market. With stock prices low, rights issues are difficult.
European banks have gradually reduced their exposure to commercial real estate since the global financial crisis. The degree to which they have the appetite to lend to property owners again remains an open question.
“CPIPG appreciates the lending appetite shown by banks across our geographies and market segments,” Chief Executive Officer Martin Nemecek said in the statement. “We will use the proceeds to repay other debt obligations.”
–With assistance from Marton Eder.
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