Real estate firms look to alternative finance as banks pull out of sector

THE ARRIVAL of senior debt funds could provide welcome new sources of liquidity in the European property market as the banks continue to reduce their exposure to real estate lending, new research shows.

Cushman & Wakefield’s latest European real estate lending survey found that just 36 out of the 78 leading global real estate finance providers interviewed said they would be willing to lend to new customers, while a further nine would only lend to existing clients.

This represents a 33 per cent fall in active lenders since the first quarter of 2011.

Even those willing to lend have highly restrictive lending criteria, with some only willing to lend in Central London, for example.

There are 32 senior debt lenders active in the European market, mostly targeting loan sizes of €20m-€50m, although five lenders interviewed did signal their capacity to underwrite over €100m.

Lenders continue to target prime assets, with much of their business in the short term set to come from refinancing rather than purchases.

According to the report, alternative finance providers will become more established and active but are not expected to fill the debt funding gap, at least in 2012.

Michael Lindsay, head of EMEA corporate finance at Cushman & Wakefield, said: “Looking ahead, the bright star is the increased lending activity and intentions of non-bank financial institutions and the potential arrival of senior debt funds this year which will provide some welcome new sources of liquidity.”