Property Loan Entrants Won’t Plug Funding Gap, Savills Says

The biggest lenders to commercial real estate aren’t lending enough to make up for an overall debt funding gap, according to broker Savills Plc. (SVS)

The top 16 lenders over the last six months, which each lent more than 75 million pounds ($122 million), included seven new entrants such as Deka Bank Deutsche Girozentrale, HSBC Holdings Plc (HSBA) and insurer MetLife Inc. Savills has published the list twice a year since 2000 and doesn’t provide the total lent.

“The new names appearing in the market are encouraging,” said William Newsom, U.K. head of valuation at Savills. “But for the most part they remain on the periphery of the market and collectively they are not making up for the reduced activities of existing players.”

Europe’s banks have curbed property loans after incurring 476.2 billion euros ($663.4 billion) of losses since the third quarter of 2007 from the financial crisis and ensuing property slump, according to Bloomberg calculations. The Property Industry Alliance group told the Bank of England in January that a 34.4 billion-pound shortfall to refinance debt due in the next four years could trigger a second slump in the value of property outside of the U.K.’s most attractive locations.

More insurers may join MetLife as property lenders after the introduction of capital adequacy rules known as Solvency II which makes real-estate debt more attractive by lowering the amount of provisions insurers need to set aside against their holdings. Legal & General Group Plc (LGEN), Axa SA (CS) and Prudential Plc’s M&G unit may step up lending, Newsom said.

“Insurers are looking very seriously at property lending but have been quite slow coming forward,” Newsom said.

The top 16 Lenders
Aareal Bank AG
Barclays Bank Plc
Bayerische Landesbank (Bayern LB)
Deka Bank Deutsche Girozentrale
Deutsche Bank AG
Deutsche Hypothekenbank AG
Deutsche Pfandbriefbank AG
Eurohypo AG
Landesbank Hessen-Thueringen Girozentrale (Helaba)
HSBC Holdings Plc
ING Real Estate Finance
Landesbank Baden-Wuerttemberg (LBBW)
Landesbank Berlin Holding AG
MetLife Inc.
Banco Santander SA
Société Générale SA

To contact the reporter on this story: Tom Bill in London at tbill2@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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