Frustration drove little-known investor Mohammad Kashani-Akhavan to take out a full-page advert in The Times on Wednesday – a frustration that is spreading across the property sector and that could be found all through MIPIM this week.
Kashani-Akhavan runs investment firm GoldLine Finance and, in his open letter to the prime minister, he complains bitterly that the banks are showing no signs of lending to the property industry – despite government pressure (p39).
Banks are either not in the market at all or are offering onerous terms that make deals unviable. Indeed, Savills reported this week that it could find only two UK banks willing to lend on deals of £25m-plus (p30). And the two with the biggest exposure to UK property – Lloyds and Royal Bank of Scotland – are doing all they can to retreat (p46).
No one is suggesting a return to the risky lending practices that landed the banks in today’s mess. But there is a growing feeling among investors that there is value to be found out of distress in the market and very viable deals based on solid income – yet lenders are still not being receptive.
The danger is that the more the banks convince themselves that now is not the time to lend, the longer it will take for the market to recover.
Gordon Brown did not bail out the banks just to stop them going bust but to reignite the lending process too. That message seems to have been lost on the banks amid all their pain. But, sooner or later, they will have to find ways of making profits again, rather than just fighting the fires.
