All the recent turbulence in the financial markets appears to have concentrated property companies’ minds on their own financing. “Relationship banking” — the term for the sort of close and rewarding partnership that bankers like to develop with their borrowers — seems to be creeping back into favour.
Since the stock market crash, London’s property bankers have been hearing from clients who, in earlier, headier days, were playing the field.
Some of the more conservative lenders have noticed that, whereas previously, developers would go to banks offering cheaper money, now they are willing to pay a bit more to be with them. And one banker was startled to get a call from a developer offering to pay him money back.
Developers are naturally getting anxious about banks’ commitment to property, and are looking for lenders who will back them in thin times. Pre-crash, Japanese and European banks were keen on property. Post-crash, no one knows whether they will stay in the market over the long haul.
In addition, the collapse of the equity market has made companies look strategically at their future funding. With share issues temporarily ruled out as a way of raising cash, and banks being more edgy about project finance, corporate packages are being worked up.
All this is music to property bankers’ ears.
