Lloyds Bank has begun significantly increasing the proportion of debt it is willing to lend on property acquisitions, a major new loan to F&C REIT shows.
The bank has issued a £147.5m five-year whole loan at a loan-to-value of close to 85% to BMO Real Estate Partners, previously known as F&C REIT, for its £175m purchase of Parkgate retail park in Rotherham, South Yorkshire from the Hercules Unit Trust.
It is the first whole loan – made up of a senior and junior portion – issued by Lloyds since the global financial crisis.
The bank has mitigated the risk associated with the higher loan-to-value ratio by selling off the junior portion of the loan. However, Lloyds issuing loans at such a high LTV is eye-catching. Following its merger with HBOS in 2008 the 14% public-owned bank was burdened with a mountain of distressed real estate debt as a result of irresponsible lending.
Banks have been steadily increasing the loan-to-value ratios and quantum of debt they are willing to write in recent times as the financing market has become more competitive.
Parkgate totals 593,000 sq ft and tenants include Boots, Next, Marks & Spencer, TK Maxx and Nike.
Madeleine McDougall, head of institutional clients at Lloyds Bank Commercial Banking’s commercial real estate team, said: “Parkgate is one of the UK’s strongest retail park assets and a destination in its own right to a large catchment area. It boasts a wide range of retailers and restaurant outlets giving it broad appeal to consumers and retailers alike.
Zvi Noé, director of investments at BMO Real Estate Partners, added: “The financing agreement provides us with a platform that will help to underpin our long-term investment into this premier asset.”
