Geopolitical risk continues to be a source of frustration for real estate markets.
Fears for a slowing global economy, deadlocked Brexit negotiations and, after a period of relative calm, political concerns in the Eurozone are rearing their head again. Despite these ongoing concerns, debt liquidity is still high; providing an opportunity for borrowers to refinance while interest rate projections remain subdued. Many of our European clients have taken advantage of this opportunity by extending their debt maturities and locking-in historically low interest rates with some also securing margin improvement.
As borrowers look to elongate their debt maturity, from a hedging perspective there is a preference to swap/fix, as anything more flexible (interest rate caps) are relatively expensive for the longer terms being sought.
From a foreign exchange point of view, the markets’ perceptions around monetary policy decisions of central banks continue to be a source of volatility. As such, foreign exchange continues to be topical among cross-border investors as well as developers with cross-border supply chains.
As always when addressing your foreign exchange risks through derivatives, be mindful of securing credit lines that are complementary to your business objectives in order to effectively manage any liquidity concerns.
For more information, please contact Shane Canavan, Director, Real Estate at JCRA: Shane.Canavan@jcrauk.com.