Commercial Property Lending

In the first six month of 2018, new business in the UK commercial real estate sector grew strongly, although the UK commercial real estate lending report shows that the overall stagnation in the UK real estate markets was largely stagnant. Apache Capital Partners has signed a 58.5 million four-year £LaSalle Investmentmanagement facility to finance the Lexington Build-to-Rent (BTR) programme in Liverpool.

An £2.8 billion commercial property lending facility has been securitised by announcing the launch of a £2.8 billion property finance programme. A £450 million Uncovered Revolutionary Facilities with a total spread of 92.5 bps to LIBOR has been underwritten by Great Portland Estates. London & Scottish Investment's LSSH Symons House, a London & Scottish Investments investment partnership and US-based Familiy House, has secured funding from the Royal Bank of Scotland to convert a former Leeds offices into a £33m hall of residence.

Managers of The Collective Old Oak, the huge residential project in West London, have purchased the remainder of 75% of the land not already owned with the support of Deutsche Bank and buy-out specialists Catalina Re. Selling Patron Capital's first-rate secondary mortgages lending franchise, Optimum Credit, to Pepper Money for an unrevealed amount.

British commercial real estate loans stabilised in 2017 thanks to strong second half of the year

The Cass UK Commercial Real Estate Lending Report reports that new business in 2017 will be at the level of 2016. In spite of a 24% year-on-year decline in lending to 17.0bn in the first half of 2017, new business in the second half of 2017 was much stronger at £17.0bn. New business of 6bnbn was much higher in the second half of 2017, with a further £26.8bn added.

Entire new investment totalled £44.5bn for the year as a whole, just like 2016. According to the most extensive survey of the UK commercial real estate lending markets, a significant amount of new lending was arranged in the second half of 2017. Furthermore, the survey showed a higher than normal 34.5 billion amount of unused financing, which was contracted in 2017 and is largely related to financing for developments.

Therefore, the formal amount of promised debts underestimates the original amount of £44.5 billion. By the end of 2017, the overall value of the credit ledgers in this study had risen by 4% to £199 billion, taking into account drawings and unused sums, while the overall amount of drawings stood at £164.5 billion. In new business, they boosted their percentage of the new business to 14% from 10% in the previous year.

Altogether they have written 6 billion pounds in new credits, of which 60% come from insurances and pensions fund. In 2017, other international banks remained behind in lending with a 8% of new business in comparison to other years. At £22 billion, credits for redevelopment projects hit a new high in terms of credit lines in redevelopment financing, of which 8.7 billion were new credits.

Most of this is accounted for by housing financing. British banks and building societies accounted for the largest share of new construction financing. Housing subsidies accounted for 57% of all housing subsidies and 44% of all commercial subsidies. It also shows that cash in the markets continues to be high, with prices and credit conditions competitively priced for premium properties.

Whereas the median interest rates were 203 basis points for prime-time offices at the end of 2017 and 198 basis points at the end of 2016, the lower LTV financing spread was up to 60% LTV 188 basis points. In the last 12-month period of 2017, the mortgage financing spreads for lending to premium real estate have risen by 40-60 basis points.

LTV rates stay low and 78% of the overall portfolio of LTV exposures are kept below 60% in LTVs. They currently represent 28 billion or 18% of overall debts. Its credit metrics and riskmodels historically depend on long-term returns and take ample opportunity to react to these changes.

Commenting on this, Melanie Leech, Chief Executive of the British Property Federation, said: Mr Neil Odom-Haslett, President of the Association of Property Lenders, added: Tim Crossley-Smith, National Head of Valuation Consultancy, GVA added: "The Cass UK Commercial Real Estate Lending Report (December 2017) will be available for sale on the Cass website.