A scarcity of debt has created “winners and losers” in the real estate market, according to asset management and advisory firm Lazard.
Speaking at a round table on real estate debt this morning, Patrick Long, Lazard’s head of UK real estate, said: “In today’s capital-constrained market, large, established real estate companies are still managing to gain finance, but smaller players are struggling.”
In particular, he said, REITs such as Land Securities, Hammerson and British Land are in a privileged position, as banks focus on existing clients rather than extending their business to smaller or newer players. For example, Land Securities secured a £1.05bn facility at the end of last year from a syndicate of banks including HSBC, Royal Bank of Scotland and Citi.
Insurance companies have emerged as an important source of new finance, he added.
“While international insurers still prefer to invest in London commercial property, their UK counterparts are increasingly willing to lend against emerging sectors such as student housing and storage,” said Long.
Lazard believes that there could be a re-emergence of the European CMBS market and that more property companies would opt for bond financing in the near future.
“It used to be the case that it was mainly companies that were household names that used retail bonds, but now we are seeing smaller companies go down this route, such as Primary Health Properties (PHP) and CLS Holdings,” Long said.
Healthcare property specialist PHP’s £75m retail bond issue began trading on the London Stock Exchange in July, while CLS Holdings, which focuses on secondary office property, raised £65m from a retail bond offer at the beginning of September.
Lazard had US$141bn (£88.8bn) of assets under management globally as of the end of December 2011 and has operations in 27 countries.
sophia.furber@estatesgazette.com
