PropList Blog
Real Estate Estate Liquidity

Over the last few weeks we have seen a lot of uncertainty in the real estate finance market and at the start of March it seemed there were almost daily changes in sentiment. Although much uncertainty remains – in particular how long and how severe the impact of COVID-19 will be on real estate and real estate debt – over the last couple of weeks, and now with the benefit of data from the last IPD payment date, lenders seem to have determined their own strategy for moving forward in the short term. Many lenders have confirmed to us they still have an appetite to lend.

We have seen a number of themes emerging in the real estate finance market over the last few weeks:

• Whilst some lenders are pulling back or focusing on supporting their existing clients, other lenders are proactively seeking new opportunities and in some cases stepping into deals where the original lender has pulled out
• Our lender and borrower contacts have reported a high level of 'nervousness' in the market – even for deals where both sides remain very keen to transact. Despite this, deals have still completed
• Lenders are adapting their strategies to target new opportunities and work within the constraints of their own funding sources and availability
• Expect underwriting of deals to be more challenging and all deals to take longer to due diligence and complete
• Our experience is that lenders are generally adopting a case-by-case review of existing loans now with the benefit of information about payment (or non-payment) from the recent IPD and in practice we have seen a range of approaches with a lender focus on their borrowers' short term needs
• If the impact of COVID-19 continues for a few months only, lenders may well be prepared and able to continue to support their borrower clients. A more protracted impact starts to raise questions.

Omega Poole, Partner - Mishcon de Reya

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