Three Things American Debt Funds Should Know Before Deploying Capital in Europe

As U.S. debt funds increasingly look to Europe for new opportunities, they might expect the transition to be seamless. After all, the fundamentals of real estate and capital deployment remain the same — or so it seems. But as Lisa Williams, Director, Head of Europe for SitusAMC, notes wryly, “Europe is not a country.” With dozens of jurisdictions, languages, regulatory environments and market dynamics, Europe can be a complex and alien landscape for U.S. alternative lenders looking to expand. 

Here are three key trends and takeaways American debt funds should understand before deploying capital across the Atlantic. 

#1 Structuring Funds and Servicing Assets Requires Deep Jurisdictional Knowledge 

Many U.S. funds begin their European expansion with the United Kingdom, given the shared language and relatively familiar legal structures. But as they look to expand into continental Europe, they often encounter roadblocks. 

“When American debt funds come here, they think it's going to be simple and fast to set up the funds,” Williams said. “But it depends on the jurisdiction, whether it's Ireland or Luxembourg. These decisions really set the stage for the success.” 

Beyond initial fund setup, deploying capital and managing assets in Europe requires deep jurisdictional knowledge and process experience. “The differences between servicing a U.S. loan versus a European asset are significant,” Williams said. “Europe isn’t a plug-and-play version of the U.S. market. To manage risks and optimize returns, alternative lenders need experienced partners who are native speakers, understand the nuances of the local market and real estate dynamics, and are deeply knowledgeable about regulatory schemes and enforcement practices.” 

For example, while enforcement is relatively straightforward in Ireland and the UK, “France and Germany are quite complicated, and Italy it takes significantly longer  

SitusAMC has deep experience helping American debt funds bridge this gap — offering commercial loan servicing, asset management and valuation management, tailored to each European market. SitusAMC was recently named CRE Loan Servicer of the Year for 2024 in Europe by The Real Estate Capital Europe Awards. 

#2 Competition Is High, and the Market Is Slower Than Expected 

As traditional banks face greater oversight by the European Central Bank, well-prepared debt funds are filling the gap, lending on development deals and competing on margins and leverage. But U.S. alternative lenders need to understand that competition is heightened and deal flow remains sluggish in Europe.  

“There's certainly  liquidity in the market,” Williams said, “but there's a lot of capital chasing fewer deals. And even when we're mandated on a deal, it's taking a long time to close.” In addition, loan sizes are much larger in Europe, and tend to be multi-jurisdictional, involving as many as 25 banks on a single deal. Investors currently favor sectors such as logistics, student accommodation and life sciences. For example, construction of One North Quay, a 23-story, vertical life science campus, touted as the largest in Europe, is scheduled to be completed in Canary Wharf in 2027. 

The commercial mortgage backed securities (CMBS) market is also tepid, with just three CMBS deals going to market in the first quarter of 2025. “We saw only five or six CMBS deals done in all of 2024, so here is a big push to try and get the market restarted,” she said. 

Deal volume has been dominated by refinancing rather than new acquisitions. First-quarter deals included a large portfolio of private rental homes and a Spanish hotel portfolio. “In 2023 we saw about 70% refinance, 30% acquisition,” Williams recalled. “Last year the ratio was about 60/40. We were hoping 2025 would switch more toward acquisitions, but we’ve just not seen the deals come out because of volatility in the geo-political landscape and financial markets. The market doesn't like instability, so there's a lack of confidence.” 

#3 Sectoral Shifts and Repo Lines Are Opening New Doors 

While traditional bank lending has slowed due to regulatory pressures and market caution, alternative financing structures are gaining momentum — especially back leverage, a form of debt extended against loans offered by alternative lenders. 

Also known warehouse lines of credit or repurchase agreements (repo lines), these facilities help alternate lenders expand financing, compete better on pricing and earn higher returns on deployed capital. Meanwhile, investment banks gain exposure without underwriting risk. 

“Repo lending has become a big part of the market in the last two years,” Williams said. “The debt funds originate loans with the lines of credit, meeting strict criteria, and if one of the loans fails, the debt fund has to repurchase it.”  

But managing these facilities is far from simple. SitusAMC provides primary servicing and asset management for the repo lines. “We manage the actual lines, preparing the reporting packages for the credit committees, handling drawdown requests,” Williams explained. “We help our clients stay compliant and effective within the parameters set by banks. Once the loans are closed, we service and manage the asset.” 

The Bottom Line: Partner Up or Pay the Price 

Ultimately, deploying capital in Europe isn’t just a regulatory challenge — it’s a strategic one. With overlapping jurisdictions, high competition and evolving capital structures, success requires a deep understanding of the local terrain. 

“Engaging a third-party provider to support alternative lending yields a range of benefits, including cost savings, greater speed and agility, deep expertise, advanced technology and more accurate data,” Williams said. 

For American debt funds looking to enter Europe, the path is navigable, with the right guidance. With decades of experience, a Europe-wide footprint and a full suite of asset management and servicing capabilities, SitusAMC can help U.S. lenders turn complexity into opportunity. 

SitusAMC is a leading provider of comprehensive commercial real estate finance services in Europe, catering to a wide range of clients in the corporate finance sector. The firm services a €105B commercial loan portfolio, manages an €28B commercial loan portfolio and conducts €55B in asset valuations annually. Download our white paper, “Unlocking Potential in Europe: 5 Advantages of Outsourcing Commercial Loan Servicing, Asset Management and Valuation Management,” here. For more information, contact Lisa Williams at lisawilliams@situsamc.com or visit our website.