Headed by chief executive Peter Cosmetatos, CREFC’s response advocates establishing a loan database for commercial real estate financings and suggests that this resource should use CREFC’s European Investor Reporting Package (E-IRP) as a template for reporting the loans. E-IRP currently focuses predominantly on loans and bonds related to CMBS.
CREFC also said: “We tentatively envisage a database operated by a commercial organisation” though it adds that the database operator “should not be able to gain any monopolistic advantage by virtue of its access to the data.
The idea of the establishment of a lending database was initially put forward in the paper, A Vision for Real Estate Finance, which was published in May by the Real Estate Finance Group made up of luminaries in the real estate finance sector such as Nick Scarles, finance director at Grosvenor; Ian Marcus, chairman of the Bank of England Commercial Property Forum; Max Sinclair, chairman of the Investment Property Forum and head of UK commercial real estate at Wells Fargo and Matt Webster, managing director and global head of real estate financing at HSBC.
The Vision report and CREFC’s response today argue that a central, loan-level database would promote a healthier, more liquid and more stable CRE debt market that poses lower risks to financial stability. Today’s response also suggests that the UK database could be the foundation for a Europe-wide initiative to increase transparency in CRE lending.
Cosmetatos told Real Estate Capital that he thought the process of establishing and contributing towards a loan database was feasible and would not become burdensome:
“We are increasingly aware of the need to reassure the market that we do not think that creating a loan database would represent a huge additional cost or administrative cost. We think the implications of doing this are manageable and would help the flow of information from borrowers to lenders and from lenders to their regulator as you would be standardising the process. Everyone would know what information would need to be provided
“The market generally already has the mechanisms for collecting data from borrowers and for lenders to collect data about their loanbook – every loan document has provision for that and this would just be standardising that whole process. We think there are market and commercial benefits that would be delivered as a result of greater transparency of data that would be useful for borrows, lenders and market observers.
The British Property Federation also said it supported improved availability of commercial real estate credit data, and a database, but added that “opinion among our members is currently divided as to how useful they would find it if it were publicly accessible”. The BPF also remarked on the “potential for significant cost to the real estate industry”.
The CREFC submission is in contrast to a submission being made by Paul Rivlin, the co-founder of Palatium and AgFe real estate partner Natalie Howard that argue that the process would be unproductive and bureaucratic.