After Bob Diamond’s often swaggering performance at this week’s Treasury committee inquiry – where the Barclays boss defended himself, his employer and his industry with no small amount of confidence – there was further evidence this week that banks have turned a corner. Their change of direction may not be to this industry’s liking.
“There was a period of remorse and apology for banks – I think that period needs to be over,” Diamond told MPs on Tuesday. Lloyds Banking Group had a similar message for the property industry this week.
The bank has cancelled its deal to sell the multi-let Civitas portfolio to Highcross after the investor tried to slice as much as 20% off the sale price ahead of the deal’s completion (page 25).
The bank had put the portfolio up for sale last summer. Highcross saw off stiff competition to put the properties under offer just before Christmas at a price of £36.1m – lower than the £40m sale price and significantly less than the £75m valuation it had once held.
So when Highcross later tried to cut the price by £6m, it was rebuffed. The bank has now instructed LPA receiver and selling agent Cushman & Wakefield to offer the portfolio back to underbidders.
Whatever Highcross’s reasons – and it is understood that the investor decided to reduce its bid during due diligence after discovering an issue with one of the properties – this marks a real signal of intent from Lloyds. And it’s one that the market needs to learn lessons from. Lloyds clearly won’t be pushed around. It’s not a forced seller. It’s not easy prey. And it can afford to be patient.
More than anything, the bank – and others like it – will not want to set a precedent.
If there were ever any doubt, this makes it clear that banks will not sell at any price.
An emphatic 95% of EG readers believe the government’s spending cuts will hurt the property industry during the first three months of 2011. That’s according to the third Estates Gazette/BNP Paribas Real Estate quarterly sentiment survey (page 50).
Most of the 635 of you who took the time before Christmas to air your frustrations – and, once again, many thanks – believe there are reasons to be fearful: 83% think the cuts had already begun to bite property by the tail end of 2010.
Let’s be reasonable. There’s no evidence to suggest that this sector is being unfairly targeted. But it’s no surprise that property is worried about a change agenda that promises fewer civil servants, less taxpayer support for initiatives previously seen as untouchable and reduced economic pump priming.
So what can the government do? It faces a tricky balancing act: while the need to cut the deficit is universally seen as vital, most people believe individual cuts should always bite elsewhere – a numerical nimbyism, if you like.
But to appropriate the words of former Cabinet minister Peter Lilley, the property industry does have a little list.
If ministers offer support for private sector-led tax increment financing and regeneration initiatives, demonstrate real commitment to a pro-development planning regime and encourage banks to lend to property owners, they could yet turn this industry’s caution into support.
We sent this issue of Estates Gazette to our printers on Thursday evening. Subscribers to our new digital edition will be reading these words first thing Friday morning – a full 24 hours before the printed copy lands on doormats on a Saturday.
Even better – there’s a free trial of the new format available until the end of January. Find out more and subscribe at http://www.estatesgazette.com and let me know what you think at damian.wild@estatesgazette.com.
