German banks pbb Deutsche Pfandbriefbank and Helaba are among the most active real estate lenders in the UK today, cornering market share from domestic players. Market experts detail the drivers behind the German advance to PropertyEU.
German banks pbb Deutsche Pfandbriefbank and Helaba are among the most active real estate lenders in the UK today, cornering market share from domestic players. Market experts detail the drivers behind the German advance to PropertyEU.
German lenders have been driving the debt market in London, ‘due to their refinancing abilities via the Pfandbrief market, plus the fact that they don’t have to deal with “slotting” issues’, according to Edward Daubeney, head of debt advisory at DTZ in London.
UK lenders are constrained by Basel III and the Bank of England’s slotting regime and are typically only able to competitively underwrite commercial real estate loans for terms of up to five years and at LTVs which do not exceed 65%.
As a result, UK banks now account for just 39% of commercial real estate lending in their home market, down from 72% in 2008, according to research from De Montfort University.
The most active real estate lenders in the UK today include Germany’s pbb Pfandbriefbank and Helaba, US bank Wells Fargo and UK-based M&G. Bailed out lenders RBS and Lloyds have also bounced back in the past two years and are lending again.
Mega property deals
The UK market has witnessed some mega property deals – and loans – this year, including the loan on the part of three banks to the Qatar Investment Authority (QIA) to acquire HSBC’s global headquarters in Canary Wharf in April. The loan comprised a five-year, £705 mln senior loan split around 40-40-20 between Lloyds Bank, Qatar National Bank and Deka Bank, respectively.
This equates to participations of about £282 mln by both Lloyds Bank and Qatar National Bank, while Deka Bank provided around £141 mln. Also in July, HSBC refinanced MidCity Place in central London to the tune of £200 mln at a margin believed to be around 120 bps.
UK loan volume soars by 50%
Overall, some £45 bn in new commercial real estate loans was issued in the UK last year, up 50% from £30 bn in 2013, according to De Montfort University’s UK Commercial Property Lending Market report published at the end of last year. This year, it’s likely to be between £50 bn and £60 bn, according to Lebus at JLL. ‘The UK real estate lending market is resurgent and exciting from a borrower’s point of view. There is an extraordinary depth of finance available for an increasing pool of product. Subsequently, there is also increasing competition among lenders,’ he said.
The increased deal volume in the UK is partly due to the 150 new entrants to the UK lending market in the past three years, of which 46 have made their first foray into the market since June 2014, according to Savills’ annual Financing Property report which was published in June.
Of the 150 new players, 60% are ‘other non-bank lenders’ such as senior debt funds, mezzanine or special opportunities funds as well as private lenders and finance firms, according to Savills. New entrants in the past 12 months include Japanese and Korean banks. For example, Shinzei and Sumitomo Mitsui banks participated in part of the ING-underwritten £365 mln loan to the Safra Group to buy the Gherkin tower last year.
Sara Seddon Kilbinger
Correspondent German-speaking countries
