Alternative lenders close deals as UK property hits six-year high



There were a flurry of announcements made by alternative lenders at the end of 2013, as investment in London’s commercial property market hit a six-year high.

US insurer MetLife, UK insurer Legal & General, debt fund manager Aalto Invest, residential specialist Urban Exposure and Russian investor LetterOne all completed financing deals before the end of the year.

Laxfield Capital, on behalf of MetLife, has arranged a 20-year, £200m (€241m) senior debt refinancing package for Edwardian Group London, secured against three hotels in London and Manchester.

Legal & General has provided a £149m loan – alongside a £77m facility from Royal Bank of Scotland – to a joint venture between specialist developer UNITE and sovereign wealth fund GIC.

Aalto Invest, which has raised £600m for its European senior debt fund, has provided £60m in debt with a loan-to-value of 64% to Benson Elliot for a portfolio of UK regional offices acquired without debt in 2013.

Marc Mogull, managing partner at fund manager Benson Elliot, said the “flexible financing proposal” was “customised to our business plan” and was completed “within five weeks of our first discussion”.

Urban Exposure and LetterOne have provided £169m of financing for the acquisition and development of a residential scheme in London.

The alternative lender has funded the £114m acquisition of 11-15 Grosvenor Crescent by Wainbridge from Grosvenor Group and will provide development financing for the residential scheme in the Belgravia area of the city.

Listed property company Helical Bar also secured a £100m refinancing for office and retail assets from PBB Deutsche Pfandbriefbank.

The big-ticket deals took place in the final quarter of 2013, a three-month period when investment activity in central London reached its highest level since 2007, according to latest figures from CBRE.

The capital attracted £16bn in transactions according to the report, boosted by a number of large deals, including the £476m sale of the Paddington Central Estate to British Land, the purchase of 30 Gresham Street for £310m by Samsung SRA Asset Management and the sale of the Lloyd’s Building for £260m to Ping An Insurance.

Cushman & Wakefield also reported a six-year high for London commercial property transactions, recording £19.9bn for the whole of 2013, a 47% increase on the previous year.

The figures included GIC’s £1.7bn acquisition of the Broadgate Estate from Blackstone.

Meanwhile, Henderson Global Investors produced a report that questioned the speed with which the debt markets in the UK have recovered.

In its latest ‘Think/Europe’ research report, it said: “The speed with which the tide has come back in on available debt financing terms is alarming and creating an environment in commercial lending (in pockets at least).”

It added: “Investors, borrowers and lenders need to be reminded of their mutual responsibility to create a sustainable debt market and not to be caught up by addictions and excesses once again.”

The British Property Federation (BPF) today urged the real estate industry to acknowledge recommendations made by a cross-industry group for helping to protect financial institutions from future property market crashes.

‘A Vision for Real Estate Finance in the UK’, a paper produced by the Real Estate Finance Group and sponsored by the Investment Property Forum (IPF), has put forward seven draft recommendations.

These include the creation of a database of commercial property lenders, the setting up of an industry committee to help inform regulators and the introduction of an accredited qualification for lenders.

The Real Estate Finance Group is chaired by Nicholas Scarles, group finance director at Grosvenor.

Peter Cosmetatos, who was appointed chief executive at the Commercial Real Estate Finance Council Europe (CREFC Europe) in September, is secretariat.

Ion Fletcher, who took over from Cosmetatos as director of finance at the BPF, said: “We warmly welcome this report, agree with the need for a vision and commend the work of the Real Estate Finance Group.”

“It is vital that the [commercial property] industry demonstrates to the regulators [that] industry participants are capable of being good ‘corporate citizens’ with an interest in maintaining financial stability and sustainable growth.”