Credit FAQ shines a light on refinancing risks in European commercial real estate

European commercial real estate (CRE) is feeling the refinancing squeeze, according to an S&P Global Ratings credit FAQ.

“Spotlight On Refinancing Risks In European Commercial Real Estate” takes a look at some of investors’ most pressing questions on CRE refinancing risks, both from a bank and a real estate investment trust perspective.

“The majority of real estate investment trusts we rate maintain solid relationships with their existing banks. They also enjoy wide headroom under bank covenants,” S&P Global Ratings credit analyst Franck Delage said. But as he also added, “getting new funding could be more difficult for companies with limited bank relationships, tight covenant headroom, or limited unencumbered assets.”

Among others, the FAQ explains how the recent turmoil in the banking sector affects the refinancing plans of real estate corporates, reveals which European banks are exposed to a high CRE loan concentration, and assesses the overall quality of European banks’ CRE underwriting.

“Due to healthy capital and liquidity metrics, European banks certainly have the capacity to lend to the economy in general and the CRE sector in particular,” said S&P Global Ratings credit analyst Nicolas Charnay. “Banks’ willingness to lend, however, is a more nuanced story.”

This report does not constitute a rating action.