New market entrants are filling the gap left by traditional lenders but broadening the mix of financiers to include insurers and pension funds now focuses lending on specific asset types with longer terms, according to a recent survey carried out by law firm Berwin Leighton Paisner.
New market entrants are filling the gap left by traditional lenders but broadening the mix of financiers to include insurers and pension funds now focuses lending on specific asset types with longer terms, according to a recent survey carried out by law firm Berwin Leighton Paisner.
The report, which points towards a back-to-basics approach to finance, highlights a concern among respondents that this situation could lead to over-supply at the top-end, reducing flexibility within the financing.
'Increased participation from non-banks is welcomed, but it needs to target underserved areas, not just saturate the already functioning prime core markets,' said Anil Khera of US investment group Blackstone. 'Senior debt funds could bring liquidity to the starving secondary markets and mezzanine funds help banks take lower risk positions while allowing sponsors to achieve the required leverage levels to transact.'
Respondents view today’s market as being characterised by less complex deals, with a greater focus on the underlying real estate asset. Investors now look for returns through asset management, rather than just financial structures. Synthetic and multi-layered transactions have largely been replaced by simplified structures which can be more easily assembled and taken apart.
'Fundamentally we are looking for a deal that both sides can easily understand and one that can be quickly and efficiently executed,' added Adam Joseph, managing director at Macquarie.
Andrew Appleyard, head of Specialist Real Estate Funds at Aviva, believes 'the ability to understand what you have actually done in a financing is going to be paramount. Simple loan structures are best and this works for people who are risk-averse'.
