Lenders more willing to provide debt for commercial – survey
GLOBAL – The level of senior debt for UK commercial real estate projects could reach as much as £36bn (€41.4bn) in 2013 and new lenders could be willing to offer development financing for the property market, according to a survey conducted by the Real Estate Lending Forum (RELF).
The survey, conducted among 36 lenders, shows that senior debt is currently defined at an average of 66% loan to value.
Additionally, the report shows that overseas lenders and new entrants are more likely to target prime assets in core locations such as London and the Southeast of England at a time when margins for prime lending lie between 225 and 400 basis points.
In total, out of the 36 lenders responding to the survey, 12 are prepared to offer development finance of up to £4bn, while non-traditional lenders could provide up to 16% of the 2013 total.
RELF chairman Max Sinclair said it was encouraging to see that the market appeared to have reached a floor in terms of funding capacity, although many of the lenders appear to be "chasing" the same deals.
"What the market now needs is for a few of the indigenous new lenders to step in with more meaningful amounts of capital so that some deal momentum can be gained," he added.
Earlier this year, IP Real Estate reported that Longbow Real Estate Capital was targeting a first-half listing for a £100m (€118.8m) UK senior debt fund targeting a 6% return.
At the time, ICG-Longbow managing partner Martin Wheeler said investors had grown more comfortable with the strategy over the past year and were now ready to invest or select a manager.
In October last year, Aviva Investors also announced plans to launch a UK senior debt fund in early 2013 targeting pension fund investors with a modest appetite for risk.