According to Savills, there is a general perception that the banks have stopped lending, but this is not correct. This view was also confirmed by the latest Lending Intentions Survey that was launched by the IPF earlier this week.
Savills' previous list of active bigger ticket lenders published in October 2011 named 19 such lenders. Savills names 21 active bigger ticket lenders. The firm however reports that this is only one part of the market as many other organizations are seeking to provide debt finance in one form or another.
Savills' bigger ticket property lenders list is set out below. The named lenders have completed at least three deals of more than £30 million over the last six months or are well advanced in realizing serious ambitions to do such business.
Four 'new' additions since October 2012 are AIG, Citigroup, Deutsche Postbank and Lloyds Banking Group. The latter two are not new entrants to the market but now meet the revised criteria referred to below. It is notable that Savills' list includes all the UK clearers (Barclays, HSBC, Lloyds and RBS), eight German banks and five insurance companies AIG, Aviva, Axa, MetLife and M&G Investments. Other emerging insurance or life companies are Canada Life and Legal & General. The UK clearers are particularly focused on doing business with existing customers.
- AIG Deutsche Postbank
- Aviva Helaba
- AXA HSBC
- Barclays Bank ING REF
- Bawag Landesbank Berlin
- Bayern LB Lloyds Banking Group
- Citigroup Met Life
- Deka Bank M&G Investments
- Deutsche Bank Royal Bank of Scotland
- Deutsche Hypo Santander
- Deutsche Pfandbrief
William Newsom, Savills UK Head of Valuation, says: "There is no shortage of organizations seeking to provide both senior debt and mezzanine. However, the real issues are firstly that lenders are very selective, and secondly tighter lending terms. Of the lenders listed, they are looking to provide finance to selected borrowers with track record secured against good quality commercial investment properties let to strong tenants on long term leases in good locations, preferably located inside the M25."
Savills confirms that loan to values (LTVs) have fallen over the past eight months and interest rate margins have increased by 100 bps from circa 225 bps to 325 bps for prime investment. LTVs against prime investment today are in the region of 55-60% with some banks having difficulty lending above 50%. This, Savills suggests, opens up increasing opportunities for mezzanine providers and (separately) banks preferring to take participations.
Savills is able to identify a further 50 senior debt providers who are active at the smaller and medium sized ends of the spectrum. It confirms there is a weaker appetite for secondary assets and, whilst commercial development finance continues to be scarce, Savills is able to identify at least 20 providers of finance for residential development schemes, particularly for smaller projects. Furthermore, Savills is able to identify 30 providers of mezzanine finance, active in both the commercial and residential markets, who have an appetite to fill the gap between a reduced level of loan to value from senior debt providers and the equity slice. In addition, there are at least 10 organizations seeking to buy distressed debt.
Newsom continues: "The number of lenders in the market is encouraging to see, but the further reduction in loan to value ratios means that borrowers may increasingly access the mezzanine market in order to bridge the funding gap."