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Real Estate

Outlook for Alternative Lending in Spain

March 24, 2022

Top Executives discuss the state of alternative lending in Spain

In early March, the GRI Club hosted an online event with some of the top executives to discuss the alternative lending landscape within the Spanish market. The session was moderated by David Campos e Cunha, Director for Deal Advisory in Corporate Finance from KPMG and was attended by Alberto Lopez, CEO of AEXX CAPITAL, Irakli Meskhi, Senior Vice President of Real Estate Debt at Starwood Capital Group, Jaime Cano, Partner at Alantra, Miguel Lainez, Principal from Cale Street Partners and Pablo Calvillo, Head of Iberia at Ara Venn, among others.
 
The GRI Club eMeetings are an exclusive, private and regular online gathering for the Club Members, in addition to the in-person conferences. The meetings have the purpose of bringing together senior players such as Private Equity Investors, Fund Managers, LP’s Developers, Asset Owners, Operators and Lenders from around the globe to discuss their views about the Real Estate market. 
 

Are alternative lenders and banks partners or competitors?

The structure of the session consisted of attendees answering polling questions and then commenting on the results.The first question asked was whether alternative lending and banks were partners or competitors, and 64% of participants believed in the first alternative, while 36% said they were on opposite sides.    
    
According to the executives present, banks don’t see alternative lenders as partners yet, but it is a consensus that they need to get closer in order to provide capital solutions to the broader works. Banks tend to move at a different pace, slower, and for that reason, alternative lenders may be seen as competition, precisely for their ability to bring velocity of execution to the table.

From a bank’s perspective, opportunities such as senior loans are more suitable for banks as are corporate lending. Deal specific lendings are more fitted for alternative creditors and it is, traditionally, associated with more risk and complex operations and this division is what created room for alternative financing companies to fill in.

Last year, 70% of transactions processed in the Spanish market came from international money. Foreing investors tend to be more comfortable dealing with alternative debt providers instead of local banks. On the other hand, local investors will always prefer to access banks since they will usually get a better deal.
 

Is alternative lending gaining more ground in the Spanish market? 

On the topic of the increased space being created for alternative lenders in the Spanish market, attendees tend to believe the main driver for it is the trend of lowering margins from alternative lenders instead of the possibility that Spain is becoming a more mature market and investors are more comfortable with Spanish risk? 

Competition is the reason a lot of alternative lenders started to quote on more core transactions and therefore, became bigger as they found ways to finance themselves more efficiently. Prices are what sets the tone of the transactions as it allows great deals for alternative debt providers.

Most executives agree that there’s no right answer and there isn’t only one reason for the rise in alternative lending in Spain. It all depends on numerous variables and particularly the asset class and the size of the deal where there needs to be a balance between flexibility and price setting.

Challenges of the Spanish market

To tackle the challenges of the Spanish market, especially the Spanish-only structures, international players have been aiding these alternative lending initiatives by taking all the advantages they can, turning challenges into opportunities, raising competitiveness and finding the right angle to add value to customers.

How does ESG affect the alternative lending market?

For the last topic of the session participants discussed the importance of financing green or sustainable assets and how that translates into better terms. For some years now, ESG initiatives have been a priority to many but the pandemic has accelerated these concerns.

Sponsors and investors have been committed to developing assets with BREEAM or LEED certifications because it was key not only for financing, but for the liquidity of the investment. Standardisation in methodologies and rules is still precarious but investors, private equity companies, owners, tennants, are all invested in complying with these initiatives.

If you want to participate in relevant discussions about the real estate market, check out all our upcoming events and apply for an eMembership

Written by: Roberta Gomes
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