Property firms turn to insurers for financing

PROPERTY developers are turning to insurers for finance as banks become reluctant to lend, according to a report released yesterday.

According to research by law firm DLA Piper, the amount of money lent by  insurers in the form of UK commercial real estate (CRE) loans will almost double to £52bn over the next five years.

“The fall in the supply of real estate debt, because of the withdrawal of bank lending, has not been matched by an equivalent fall in demand,” the report says.

“Insurance groups with capital at their disposal ... may expect to receive returns over and above what is presently available elsewhere.”

Insurers are most likely to draw on their annuity funds, with a focus on retail and office space in London and the South East.

Recent deals include Aviva and Canada Life’s £209m refinancing of property fund Picton, as well as Legal & General’s £121m loan to student accommodation developer UNITE.

“Whilst the number of insurance companies active in this space is currently fairly small, the expected returns from CRE lending have an attractive profile and we will see more insurance groups move into the market,” said DLA Piper’s Simon Cookson.