The first half of 2023 undoubtedly saw fewer real estate finance transactions compared to the previous year. In the US, it is estimated that commercial real estate investment volume has fallen by as much as 57% year over year. In a recent press release BNP Paribas Real Estate has forecast that investment in UK commercial property will fall to £41bn for 2023 due to successive base rate hikes. With rising interest rates increasing the cost of borrowing, and inflation leading to higher construction costs, many borrowers held off from taking on new finance. Equally, falling property values and economic uncertainty made lenders cautious.
Many borrowers have turned to mezzanine debt to plug funding gaps. Mezzanine debt is not typically secured by real estate assets, and is therefore ideal for borrowers who have existing charges over such assets. Similarly, preferred equity funds are rapidly forming to provide bespoke solutions to ease the debt market strain on borrower capital stacks.
Real Estate Credit Investments Limited (LON:RECI) is a closed-end investment company that specialises in European real estate credit markets. Their primary objective is to provide attractive and stable returns to their shareholders, mainly in the form of quarterly dividends, by exposing them to a diversified portfolio of real estate credit investments.
