Legal and General weighs up first deals for diversification into property lending

Legal & General’s new commercial property lending business is looking at several potential transactions. The team is headed by Ashley Goldblatt and includes Steve Boyle and Graham Rouse, who joined in the summer from Aviva Commercial Property Finance.

At his first press briefing in the role since moving from the fixed income division, Goldblatt said that yield, diversification and favourable regulatory treatment are behind the insurance group’s step into the market.

He said the treatment of property loans under Solvency 2 regulations for European insurance companies “almost looks too good to be true”. Goldblatt noted that the few lenders in the market are able to charge higher margins, so the yield on lending was “higher value for money than if we put cash to work in the corporate bond market”.

He added: “Corporate bond markets are heavily skewed to the financial sector, which is our business, so we are picking up similar risk. “In the commercial real estate market we will pick up exposure that is different – so it enhances diversification for us.” Set up in-house within Legal & General Investment Manage-ment, the business will initially focus on long-term, fixed-rate loans to match liabilities in L&G’s £25.5bn annuity book.