US groups muscle into UK property lending market

Six new lenders – including US players GE Capital, AIG and Jefferies International - entered the UK commercial property market in the second half of 2011, according to property adviser Savills.

The other newcomers are Legal & General and Chalkhill Partners, both of the UK, and Jordan International Bank. In addition, Savills has added four names to its list of active bigger ticket: French group AXA, Austrian lender Bawag, and HSBC and M&G Investments of the UK.

The firm defines ‘bigger ticket lenders’ as those which are both actively seeking and have actually achieved total new lending over the previous six months of at least £75 mln (€87 mln) in typical loan sizes of above £20 mln.

‘This is extremely positive news for the market,’ said William Newsom, Savills UK head of valuation. ‘Many of these banks have meaningful quantities of money to lend, albeit most of the German Pfandbrief-backed banks find loan to values (LTVs) above 50% challenging. Many banks are constrained by regulatory and capital adequacy issues, notably under Basel III, with a result that there is downward pressure on LTVs and upward pressure on interest rate margins. Margins have probably increased by 25 basis points over the last quarter, albeit against a background of continuing low cost of money.’

The entry of six non-eurozone players to the UK lending market and the graduation of two local groups to the list of bigger ticket lenders confirms the prediction made by Savills in early October that the UK property market would likely see the appearance of more local institutions and insurers as lenders as they seek to benefit from the Solvency II regulations.

Compared with the last list published at end-June, debt-plagued French bank Société Générále has exited the list. Nonetheless, eurozone players still dominate the list with 12 of the 19 lenders based in mainland Europe.