Editor’s letter: The UK on hold

Andy Thomson
Andy Thomson

Did someone say there was a referendum happening somewhere? As we went to press with this issue of Real Estate Capital, the market was of course abuzz with talk about what may or may not happen in the vote itself – and also what may follow from the verdict of the British public. As you read this, the result will be known and hopefully we can all resume something approximating normal life.

The nervousness and caution in the run-up to the UK referendum was evidenced in the latest version of the Laxfield UK Debt Barometer. The survey showed requests for acquisition finance loans of £50 million or more approximately halving in the first quarter of this year to 25.9 percent of borrower requests (by volume) from 51.8 percent in the fourth quarter of last year.

While appetite for smaller loans appeared to be staying strong, the waning of activity at the larger end may be attributed to the presence there of larger, international investors which appeared to be sitting on their hands, waiting to see what would happen on 23 June.

There have been sceptical mutterings from some quarters that the possibility of Brexit – and other concerns such as oil prices and China – are just being used as an excuse for inaction. Many believe – to put it bluntly – the banks just don’t want to lend any more. Frequently we hear talk of the “bank retreat”, which alternative lenders cite as the reason why a gaping opportunity has opened up for them.

And yet, evidence from the US appears to point in a very different direction. At the recent Keefe, Bruyette & Woods (KBW) conference in New York – attended by REC – research was referred to which showed the banks accounting for 56 percent of outstanding CRE debt held by investor group – way more than any other grouping and the highest market share held by the banks going all the way back to 1960.

There is no doubt, however, that there is regulatory pressure on banks which is forcing them to think hard about their models. This month’s country report on Germany includes an article on syndication, which reveals that some of the domestic stalwarts of that market are syndicating a greater proportion of loans than they have done previously.

Also in this issue we have a profile of PGIM, the newly branded business which tells us about its strategic plans for the period ahead; an interview with TD Bank, which has pivoted to affordable housing loans; an overview of the European syndication scene; a feature on required action in the event of borrower defaults; and much else besides.

Our next issue is September, when we look forward to reflecting on how the UK vote has played out. In the meantime, have a great summer.