Big-ticket lending deals of more than £100m are set to remain scarce, according to the findings of Jones Lang LaSalle’s 2011 Lenders’ Expectations report.
The agent found that although more respondents this year were willing to lend between £50m and £100m, less than 40% of respondents thought they would be lending amounts above £100m by the end of 2011, compared with around 50% thinking they would do so in last year’s survey.
However, many lenders expect that larger deals of more than £600m will be back on the agenda in 2012 when the worst of the economic crisis should be over and the market is expected to pick up again.
Refinancing is expected to dominate lending activity during the next two years, with a number of respondents stating that refinancing will consume between 70% and 80% of lending.
Loan-to-value ratios are expected to remain between 60% and 70% in 2010 by the majority of those surveyed, while “a few” believe LTVs will stay below 60% over the next couple of years.
The report found that “most” see senior debt at 65% and do not expect this to go above 70% in the coming years due to a lack of liquidity, legislation and regulatory changes.
There is a significant increase in the number of lenders anticipating LTVs to increase in 2012 when 37% are expecting these to be above 70%. None of those surveyed expect to see LTVs above 80% before 2013.
JLL found that “several” respondents believe that more secondary assets are likely to come onto the market and will become more financeable. Consequently there is a sizeable increase in prospective lending for secondary assets, from 13% in 2009 to 20% this year and further increases in 2011 and 2012.
Almost one-third of lenders think that the CMBS market will return in 2013. Club deals and syndications will be the route to debt on larger ticket deals.
Director Andrew Hawkins, said: “The lending markets are quick to change and fluctuate, and it has become clear throughout our interviews that credit conditions are shifting. A year ago we were predicting greater liquidity than we are now experiencing and the outlook is similarly challenged.
“There is without a doubt a polarising of debt provision – borrowers with strong existing relationships are well placed to access the lending markets, whilr although not impossible for new entrants, the challenges are still there.”
bridget.oconnell@estatesgazette.com
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