JCRA: Lenders have higher appetite for leverage

The debt advisor saw a trend towards higher LTV loans in the 12 months to June, according to its latest UK real estate report.

Lenders in the UK commercial real estate market increased their engagement with higher loan-to-value lending in the past 12 months to June, according to a report from debt advisor JCRA.

The largest increase occurred in the 75 percent LTV range, with lending up to £1.5 billion (€1.6 billion) from £178 million in the previous 12-month period.

This spike was driven by two large transactions which closed over the period, totalling £1 billion. But even with these large transactions removed the trend of higher LTV loans was evident, albeit less pronounced, JRCA said.

“Lenders are making reasonable assessments of deals before lending at high LTV levels,” Simon Marshall, director of real estate debt advisory at JCRA, told Real Estate Capital. “Unlike what we saw before the global financial crisis, lenders aren’t increasing LTVs to compete against each other.”

The 13 highest LTV loans closed over the period, including those at the 75 percent LTV level, were provided by non-traditional lenders, including challenger banks, international banks and other alternative lenders. The most common leverage by number of loans was at the 65 percent level, with 19 transactions, followed by 60 percent with 18 transactions. There were predominantly issued by high street and German banks.

The data suggests that while high street banks may be shifting toward a tighter credit policy, they are still somewhat active at the lower risk end of the market. On the other hand, non-traditional lenders are finding themselves more competitive at the higher risk end, JCRA said.