#bad credit cash loans London
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5 Reasons To Choose a Pawnbroker For Quick Cash In London
Although pawnbroking has existed for thousands of years, it has only recently gained recognition. This is because many people weren't sure what it meant or how it worked. A Pawnbroker is an established individual or entity that offers money as a loan in exchange for an item's value. The pawnbroker will keep hold of the item until you repay the loan or sell off the item to retrieve the amount if you fail to repay.
However, over the past couple of years, pawnbrokers' reputations have evolved greatly. Today, they are more professional and accessible than ever. As a result, more and more people are interested in pawn loans as a method of short-term borrowing.
When used appropriately, Pawnbroking can offer numerous benefits, especially to people who are looking to get hold of quick cash. If you're new to pawnbroking loans and want to know how it can benefit you, this blog is for you.
5 Key Benefits Of Using Pawnbroking Loans For Quick Funds
1. Get Instant Cash
The speed of the process makes using a pawnbroker one of the best ways to secure fast cash. Unlike other loan types that typically require a couple of weeks for approval, a pawn loan ensures you access funds immediately. All you need is collateral for the loan, and the pawnbroker will assess it to give you cash on the spot. It's an easy and convenient same-day transaction.
2. No Credit Checks
As pawnshops don't require credit checks, it is the best way to secure funds for people with bad credit history. Banks or other financial institutions carry out a credit check before loan approval. On the other hand, a pawnbroker won't bother to ask or check. You will get the money quickly and conveniently, regardless of your creditworthiness.
3. Fully Regulated
Contrary to popular belief, pawn loans from reputable pawnbrokers operating in London or anywhere in the UK are fully regulated. The reputed pawnbrokers follow strict guidelines and ensure customers are treated fairly at all points. They abide by strict laws and regulations to protect the borrower's valuable items. You can rest assured that your valuables will be entirely safe and secure while they are in their possession during the short-term loan period.
4. Flexible Repayment Option
Pawnshops provide flexibility when it comes to repaying the loan. They typically offer short-term loans for a few weeks and months, and you have the choice of repaying the loan along with the accrued interest anytime between the loan tenure to claim your item back. You can also choose to extend the loan period if needed. This way, you can effectively manage your finances and ensure prompt repayment. The best part is that if you fail to repay the loan, you won't have debt collectors chasing you, and it won't even impact your credit rating.
5. Convenient
One of the main reasons why pawnbrokers in London are gaining so much popularity is convenience. Pawnshops offers a cash-based solution that does not require a bank account or lengthy paperwork or documentation. This method is advantageous if you want to avoid the lengthy procedures of conventional financial institutions. You only need valid proof of identification to pawn your item and get cash.
Some Other Benefits:
Obtain multiple loans at once
Sometimes, you want to pawn more than one item to secure more cash. Reputable pawnbrokers in London usually allow you to take a loan against more than one item at a time, as per your need. Also, you can use the same item as collateral as many times as you want.
No Long-Term Commitment
Traditional lending institutions, such as banks and other organisations, typically demand long-term commitments, leaving you tied to lengthy repayment plans that can cause added stress. In contrast, taking a loan from pawnbrokers in London comes without long-term obligations, offering short-term loans designed to meet your immediate cash needs efficiently.
Friendly Service
Most pawnbrokers in London provide friendly, personalised service when you borrow cash from them. They understand your situation while taking a loan and try to make the process simple and hassle-free to ensure complete peace of mind.
CONCLUSION
Recently, pawnbrokers have carved a niche for themselves and become a go-to option for securing quick funds. They provide a safe environment, friendly service, and top loan value without impacting the borrower's credit score. So, it's clear that pawnbrokers offer more than just one benefit.
For those looking for quick cash in London or anywhere in the UK, pawnbrokers provide several advantages that conventional lending options fail to acknowledge. Therefore, consider the benefits of borrowing money from pawnbrokers in London and use your valuable assets to meet your urgent financial needs.
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Car Title Loans London | Instant Vehicle Title Loan
Get quick cash with car title loans London through Canada Loan Shop. With our instant vehicle title loan, you can use your car’s title as security and still keep driving. Whether you have good, bad, or no credit, we offer fast approval and flexible terms to help you handle unexpected expenses. Canada Loan Shop makes the process simple and stress-free. Apply now for a convenient financial solution tailored to your needs. Visit our website to learn more.
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Urgent Financial Needs? Consider Car Title Loans in London, Ontario
Snap Car Cash offers Car Title Loans London, Ontario, providing flexible borrowing options from $1,000 to $50,000 for those in need of an Emergency Cash Loan. With Car Collateral Loan services, your vehicle acts as security, allowing you to secure the funds you require fast and effortlessly. Whether you need an Auto Pawn Loan or a Bad Credit Loan, Snap Car Cash considers your car's value rather than your credit score, making it accessible to individuals with varying financial backgrounds. Our streamlined process ensures minimal paperwork and swift approval, so you can get the money you need without hassle. Trust Snap Car Cash for reliable and efficient Car Title Loans in London, Ontario.
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Unlock Cash with Car Title Loans in London | Bad Credit? No Problem!
Overcome financial setbacks with Car Title Loans London, where bad credit is not a barrier to borrowing money. Our innovative lending solutions allow you to use your vehicle as collateral, enabling you to secure the funds you need, even with a less-than-perfect credit history. Say goodbye to credit score worries and hello to fast, reliable cash assistance.
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Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
Europe is bracing for a sharp, abrupt real estate reversal
Turmoil in trophy properties in London and Frankfurt offers a glimpse of the damage in store for European property investors as they face the sharpest turnaround on record.
From a grueling refinancing process for an office building in the City of London to the grueling sale of the Commerzbank Tower in Germany’s financial center, investors struggle to find ways to bridge funding gaps as credit markets are bogged down by rapidly rising interest rates.
The reality check will begin to hit in the coming weeks as lenders across Europe get the results of year-end assessments. Sharp falls in valuations threaten to lead to loan covenant violations, triggering emergency financing measures, from forced sales to pumping in fresh cash.
“Europe is going through the great relaxation of 10 years of easy money,” said Skardon Baker, a partner at private equity firm Apollo Global Management. “The amount of suffering and disruption is off the spectrum.”
Loans, bonds and other debts totaling about €1.9 trillion ($2.1 trillion) — nearly the size of Italy’s economy — have been backed by commercial property or issued to landlords in Europe and the UK, according to the European Banking Authority , a study by Bayes Business School and data collected by Bloomberg.
Roughly 20% of that, or about €390 billion, will mature this year, and the looming crisis marks the first real test of regulation designed after the global financial crisis to curb real estate lending risks. Those rules could make a correction steeper and more abrupt.
The Commerzbank Tower in Frankfurt, Germany. Photo credit: Alex Kraus/Bloomberg
“I think the revaluation will be faster than in the past,” said John O’Driscoll, head of the Real Assets division of French insurer Axa SA’s investment management unit. “People start to be exposed as the tide goes out.”
European lenders will be urged by the new regulations to be more aggressive against bad loans. They are also in better shape than they were during the last real estate crisis more than a decade ago, and so may be less inclined to let problems fester. That puts the burden on the borrowers.
Rules of the game
What changed
Why it matters
Banks must make provisions for expected, rather than accrued, losses
No more “extend and pretend”
Loans with breaches of covenant entail a higher cost of capital
Incentivizes banks to act faster on bad loans
German private investors have to wait up to a year for repayments from real estate funds
Ensures a more orderly sale of assets
French real estate funds must hold at least 25% of the funds in cash or shares
Provides liquidity buffer
In the aftermath of the 2008 financial crisis, most banks were reluctant to take on bad loans as it would have resulted in huge losses – a practice called “expanding and pretending”. Under new rules on non-performing loans, lenders will have to make provisions for expected rather than accrued losses. That means they are less likely to sit still and hope that asset values will recover.
“The year-end valuations in the first quarter will be crucial,” said Ravi Stickney, managing partner and chief investment officer for real estate at Cheyne Capital, an alternative investment fund manager that raised £2.5 billion in real estate loans last year. “The question mark is what the banks actually do.”
Coping Strategies
Some recent deals show how real estate companies are responding to the end of the easy money era, but forced sales are the exception rather than the rule for now.
1 portsoken street
Owners of an office building on the edge of London’s insurance district failed to secure refinancing before some £140 million ($174 million) of debt matured in July, leading it to include a material uncertainty clause in its accounts issued in August were submitted.
Although the modernized and partially leased building was valued at around £220 million in February 2022, values have since fallen. For the remaining space, both refinancing and lease discussions are underway that could provide a solution. Without progress, the result could be a forced sale.
One poultry
The Korean owners of the building near the Bank of England extended shareholder credit after a fall in value led to a breach of a Bank of Ireland loan, according to company accounts. The strategy obviously requires owners to have cash available, which is not the case for many highly indebted European landlords. React News previously reported the missed refinancing TBEN.
Opel construction
In London, Guangzhou R&F Properties Co. an alternative to bank loans. The Chinese developer turned to a consortium with Apollo Global Management Inc. and Carlyle Group to secure £772m of senior and mezzanine debt to resume work on an apartment and hotel complex in Vauxhall.
Commerzbank Tower
In Frankfurt, another Korean investor chose to try to sell the tower occupied by Commerzbank AG instead of trying to refinance. That is a rare step in today’s market. According to Chris Staveley, head of international capital markets in Europe for JLL, about €20 billion in planned office sales in Europe was pulled last year as sellers heeded falling values.
Senior debt ratings
So far, valuations have not fallen enough for senior debt – the loans typically held by banks – to be underwater, but that could soon change. By CBRE Group Inc. valued commercial property in the UK fell 13% last year. The decline accelerated in the second half, with the broker recording a 3% decline in December alone. Analysts from Goldman Sachs Group Inc. have predicted that the overall decline could exceed 20%.
Banks can then act before prices fall further and risk credit losses, forcing indebted landlords into difficult alternatives. The problems become more thorny for those dealing with debt. Lenders reduce the amount of a property’s value they are willing to lend. That means a lower rating could be a double whammy, widening the funding gap.
“Banks’ appetite is lower and will continue to be lower” until there are signs that the market has bottomed, said Vincent Nobel, head of asset-based lending at Federated Hermes Inc. The new regulations urge banks to deal with bad loans “and one way to solve problems is to make it someone else’s problem.”
Sweden has been the epicenter of the crisis so far, with house prices expected to fall by 20% from peak levels. The country’s listed real estate companies have lost 30% of their value in the past 12 months, and Sweden’s central bank and financial supervisory authority have repeatedly warned of the risks posed by commercial real estate debt.
According to Anders Kvist, a senior advisor to the director of the FSA, declining property values could create a “domino effect” as the demand for more collateral could force a forced sale.
While there is some stability, such as in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.
On the bright side, there are more options available to investors in tied real estate. Entities such as closed-end credit funds have grown steadily over the past decade. Collectively, insurers and other alternative lenders had a higher share of new property loans in the UK than the country’s largest banks in the first half of last year, according to the Bayes survey.
Over the next 18 months, investors will pour a record amount into so-called opportunistic funds that take on riskier real estate bets, Cantor Fitzgerald CEO Howard Lutnick said at the World Economic Forum in Davos last week. The trend will help accelerate an upswing in commercial real estate markets, he said.
These new tools could make the turmoil shorter than in the past, when banks held onto bad loans for years. Louis Landeman, a credit analyst at Danske Bank in Stockholm, expects the reset to be relatively orderly and that borrowers will have enough to take countermeasures.
“Anyone who can come up with a creative way to fill that gap is going to have a great time,” said Mat Oakley, head of commercial research at Savills.
–With assistance from Anton Wilen, Antonio Vanuzzo, Damian Shepherd, Konrad Krasuski, and Nicholas Comfort.
0 notes
Text
The Home Development Nightmare-Who's To Responsibility and How To Prevent It
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