Amid the continuing uncertainty following the UK’s vote to leave the EU, LaSalle has put its best foot forward. Will others follow?
News this week that LaSalle Investment Management (LaSalle) had put together a £110 million debt package to support a housing scheme in London’s Finsbury Park may have raised a few eyebrows.
After all, in the wake of the Brexit vote, the London real estate market was supposed to be on hold. On 21 July, the Royal Institution of Chartered Surveyors (RICS) released the results of its Q2 UK Commercial Property Market Survey, indicating “a significant drop in confidence and investor demand following the Brexit vote”.
Across the UK as a whole, 36 percent of respondents told RICS that they thought the UK market was in the early stages of a downturn, but in London 54 percent of respondents took this view.
LaSalle’s faith in Telford Homes’ City North scheme (which it first got involved in in 2014) was notable not just for bucking the negative sentiment towards UK real estate in general, but also for being an example of development finance, which is viewed as being particularly difficult to source at the current time.
Striking also was the strident tone adopted by Amy Aznar, head of debt and special situations at LaSalle, who said: “We anticipate a strong uptick in lending opportunities in the wake of the Brexit vote and we believe that the UK will present compelling debt investment opportunities over the medium term horizon.”
Part of the explanation for what appears to be a contradiction – enthusiasm for lending into a more difficult part of the market at a time when economic alarm bells are ringing – rests in the opportunity that non-banks are identifying to take market share from the banks. The latter insist they remain open for business but are undoubtedly more cautious in the face of Brexit.
To borrowers worried about how to finance certain projects in the face of banks’ wariness, deals such as LaSalle’s are an impressive statement of intent that will certainly not go unnoticed. It’s a good way of winning friends and influencing people.
Another factor to consider is that, when it comes to residential schemes, the supply/demand imbalance in the UK continues to make the sector appear attractive. With a particularly acute disparity between demand for and availability of affordable housing in the capital, it’s clearly pertinent that the Finsbury Park project – while mainly a private flat development – also comprises a healthy number of affordable homes.
In the student housing segment, there is also much confidence emanating from lenders prepared to put aside their fears over macroeconomic factors and focus instead on the fundamentals. “The UK student sector is still very attractive for foreign students and the currency factor [the falls in pound sterling] have made that even truer. There is no reason why you would not do anything in that space,” a market source recently told Real Estate Capital.
“The only thing we have to fear is fear itself” someone once famously said. Those not prepared to be wracked by fear may take encouragement from LaSalle’s example.