0370 270 6000

already registered?

Please sign in with your existing account details.

need to register?

Register to access exclusive content, sign up to receive our updates and personalise your experience on brownejacobson.com.

Privacy statement - Terms and conditions

Forgotten your password?

real estate finance down but not out

18 July 2012

Whilst market conditions remain tough, there are nevertheless some positive signs in the real estate finance market.

First the bad news:

  • it is apparent that there has been a reduction in real estate finance activity over the last year or so. The 2011 survey into the UK Commercial Property Lending Market carried out by De Montfort University revealed that the quantum of real estate finance was down by 6.8 compared to 2010
  • interest rate margins for investment finance rose over the same period to 3-3.5
  • the majority of lenders of investment finance are seeking loans of above £20 million, highlighting the difficulties in sourcing finance for investors / borrowers wanting smaller facilities
  • secondary property investors are also finding the market particularly challenging as lending into this part of the sector has declined from 2010-2011
  • this coupled with the introduction of slotting by the FSA, which has resulted in more capital having to be set aside than the Basel III regime requires, meaning that bank lending into the secondary sector has become more restrictive and expensive. (The slotting conditions require banks to allocate each loan to a risk category, with more capital having to be put aside as the loans default risk increases.)

…and now the good news:

  • prime property lending however is on the increase and...due to the quality of such assets slotting can lead to lower pricing for lending against them
  • further the De Montfort survey shows that there has been an increase of 8.6 in investment finance loan originations from 2010 to 2011
  • equity and mezzanine finance is becoming more readily available
  • the insurance and senior debt funders such as Allianz, Aviva, Morgan Stanley and Pramerica are becoming increasingly active in the sector. The insurers lent £3bn into this sector in 2011 which they find attractive considering the low returns otherwise available from shares, corporate bonds etc. Also the insurers capital regime is not as restrictive as the banks Basel III rules
  • there is a continued flight to quality as evidenced by the fact that the capital value of secondary properties decreased markedly over the last year or so whilst prime property values increased. But this can create favourable market opportunities for investors in the secondary market

The general consensus seems to be that 2012 will see the bottom of the real estate market...and so the only way is up?! And, despite challenging market conditions, there seems to be some optimism about investment opportunities in this sector.

Our real estate finance team are at the forefront of market developments and are well placed to assist you with any of your funding needs.

training and events

7May

NHS White Paper - Ensuring accountability and enhancing public confidence Online

This is the third in a series of four webinars regarding the NHS White Paper. We will provide an overview and discussion of the ensuring accountability and enhancing public confidence proposals section of the white paper, looking at the framework for oversight of the health system and workforce accountability.

View event

10May

Universities Human Resources Annual Conference Online

Come and meet our Head of Higher Education, Bettina Rigg. We’ll be on hand to discuss how our full service team can support your institution.

View event

focus on...

Legal updates

Extending Covid-19 support – how to avoid the pitfalls

Throughout the pandemic, many businesses have made good use of the HMRC-administered Covid-19 relief schemes. Such support has helped them survive the difficult economic conditions and manage staffing and revenue issues as a result of the strict lockdown rules.

View

Alliance Network East Midlands - the importance of intersectionality

Watch our on-demand video with The Alliance Network where the panel will focus on the key theme of intersectionality, and the breadth of experience of a diverse LGBTQI+ community.

View

Broker Insight event

Catch up with our Broker Insight on-demand video. With many intermediaries looking to buy, sell or seek external investment, we explored the elements of a successful M&A transaction.

View

Legal updates

Liberty Protection Safeguards: what we know so far

The Liberty Protection Safeguards (LPS) implementation date has been moved to April 2022, but a lot will need to happen before the Deprivation of Liberty Safeguards (DoLS) are swept away.

View

The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

mailing list sign up



Select which mailings you would like to receive from us.

Sign up