UK Real Estate

By Chris Bourke

Oct. 6 (Bloomberg) — Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc are among lenders likely to make larger U.K. commercial property loans as financial markets recover, Savills Plc said.

A total of 23 banks said they would loan more than 20 million pounds ($32 million) to a buyer of U.K. commercial real estate, Savills said in a statement today, citing the results of a September survey of more than 100 lenders. That’s almost double the number that said so in March, Savills said. Almost half of the banks are based in Germany.

Lenders are slowly returning to the British commercial- property market as their own borrowing costs decrease and prices fall, according to the London-based property broker. The London interbank offered rate, or Libor, has fallen to about 0.2 percent from 1.6 percent in the fourth quarter of 2008. Around six banks said they would lend more than 100 million pounds, the statement said.

“Major names have stated strong ambitions to lend in the property market following pricing corrections and a reduced cost of funding,” said William Newsom, head of U.K. valuation for Savills, the largest publicly traded U.K. real-estate broker.

Barclays, HSBC

Banks prepared to lend more than 20 million pounds also include Barclays Bank Plc, HSBC Holdings Plc and Banco Santander SA, according to the statement. German lenders willing to offer that amount include DekaBank Deutsche Girozentrale and Landesbank Baden-Wuerttemberg.

About 39 percent of commercial real-estate sales in the first half were between 10 million pounds and 20 million pounds, according to Savills’ data. Of the 11 sales of 100 million pounds to 200 million pounds, only one buyer didn’t arrange debt, Newsom said.

Even so, “lenders are treading a path of prudence,” Newsome said. “Volumes remain reduced due to a scarcity of good quality product and cautious lending policies, as property remains largely out of favor with bank bosses.”

RBS and Lloyds have about 100 billion pounds of loans against U.K. offices, stores and warehouses between them, according to a Sept. 7 note from Creditsights Inc. There’s about 230 billion pounds of loans against U.K. commercial real estate in total, according to a De Montfort University study. Almost all of them are in default after market values slumped 44 percent, according to CB Richard Ellis Group Inc.

“We continue to support the real estate sector, despite challenging market conditions,” said David Gaffney, a spokesman for RBS in Edinburgh. “We remain open for business for well- structured property deals with quality operators.” Leigh Calder, a London-based spokesman for Lloyds, declined to comment.

Newsom said in the statement that he wasn’t aware of any significant new lenders preparing to enter the British market.
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