PropList Blog
Real Estate Finance New Lending

New Lending

A number of the pension and insurance fund lenders seem to have put in place a moratorium on new lending for the timing being and, on a debt advisory mandate on which we were recently instructed, were the first to explicitly say they could not currently consider providing finance. Other lenders, such as retail banks or those with large legacy books, have communicated to us that their short term priority is to support existing clients and manage their legacy book rather than to consider new deals. Lenders have even asked some clients to approach them first if other lenders pull out of deals. Such lenders have provided differing time frames for when they might be able to next issue new terms or a commitment, from a fortnight to a couple of months. Like many market participants, we expect that in practice such lenders will adopt a 'wait and see' approach going forward.

At the other end of the spectrum, a number of lenders – including bridge finance providers, whole loan and senior lenders and those with preferred equity or special situations strategies – have proactively approached us to confirm they are very much open for business and also interested in new opportunities that arise as a result of an existing lender not being able to complete deals it had committed to in principle.

We are aware of a number of situations where a new lender has taken over from another lender. An alternative lender reported that it had, within a period of two weeks, stepped into the shoes of an insurance fund lender which had provided terms for a senior loan but pulled out after the sponsor had exchanged and its deposit was on risk. The debt fund was able to step in and provide a 12-month bridge loan with pricing to reflect the short time frame and deal risk. Similarly some of our borrower-clients have seen lenders pull back when terms had been agreed and even occasionally where the loan was already in documentation – however another lender has then stepped into the breach and taken over the financing, subject to negotiating appropriate pricing changes to reflect the risk. For the most part, lenders have communicated to us that they have been internally mandated to complete deals that they have committed to in principle or are in documentation on – with the exception possibly of some which are very heavily impacted by the lock down such as restaurants and hotels.

Certainly, of the lenders who say they are very much 'open for business', many are opportunistically looking to achieve pricing in the short term which reflects the short term market driven risk on assets that they view as fundamentally robust. However others are looking for the opportunity to become new long term financing partners for sponsors that have traditionally been banked by other lenders. It is also the case that some lenders that want to be seen as active, have in practice pulled back, and in some cases pulled out of deals with long term sponsors.

Sponsor clients have approached us where they have concerns that the lender(s) to whom they have been speaking may no longer have appetite to do the deal – although this has not been formally communicated to them yet. In such cases, we can speak with our wide network of lender contacts to provide the client with market feedback on which lenders may have appetite to lend on their property should their preferred lender fall down, and as appropriate make introductions to such lenders.

Our lender and borrower contacts have also 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.