Notes from a presentation given to RICS Matrics on 29th Sept 2015 by Simon Wainwright FRICS

1. RICS Matrics Series
Funding and Finance:
Market Update
September 2015
Simon Wainwright BSc FRICS
J PEISER WAINWRIGHT
#CPDseries

2. Funding and Finance: Market Update
• Macro-economic factors
• Finance for property investment & development
• Types of lending
• Who is providing funding - participants
• Funding terms
• Current terms
• Role of professionals

3. Economic Background
• US Federal Reserve rate 0.25%
• UK Base Rate 0.50%
• UK 5-year SWAP rate 1.45% (1.79% Nov)
• UK 10-year SWAP rate 2.16% (2.32% Nov)
• BoE Quantitative Easing £375 bn
• Outstanding property debt £244 bn
• European inter-bank lending weak
• Inflation RPIX 0.0% Aug 2015
• Inflation CPI 0.0% Aug 2015

4. One Country Two Economies

5. Wealth Preservation

6. Private Equity

7. Market Participants
• The rise and fall of the Debt Based buyer
• The return of the Institutional Investor
• New lenders / investors entering the market
• Foreign investors – Sovereign Wealth funds
• Private Equity and Opportunity funds
• Corporate buyers
• Private investors, trusts and charities

8. Where can you find value?

9. Attracting Investment
• What is the risk profile of your investment?
• Does it have intrinsic value and growth potential
• Is it in the right location to attract investment?
• Is it the right lot size?
• Who are the obvious buyers?
• Can you secure debt against any contracted
income streams?
• What is the AWULT?
• What is the tenant’s credit risk?

10. Glossary of terms
• LTV = Loan to Value ration
• CMBS = Commercial Mortgage backed securities
• NAMA = National Asset Management Agency
• Margins = lending margin over interest rates
• Arrangement fees = charged by banks on loan origination
• Income interest = ration of income to interest
Date Source
UK Commercial Property Lending Survey
De Montfort University

11. Approximate amount of debt secured by UK
Commercial Property Source: De Montfort University
Source: De Montfort University

12. Approximate amount of debt secured by UK
Commercial Property Source: De Montfort University

13. Allocation of drawn funding £179.8bn
Source: De Montfort University

14. Proportion of debt held by 12 largest lenders
Source: De Montfort University

15. Current LTV ratios by proportion and value of
outstanding debt Source: De Montfort University

16. Value of loan originations (£bn)
Source: De Montfort University

17. New loan originations (£29.9bn)
Source: De Montfort University

18. Proportion of lending completed by 12 most active
lenders
Source: De Montfort University

19. No. lenders prepared to lend against varying loan
sizes
Source: De Montfort University

20. Average interest rate margins
Source: De Montfort University

21. Average interest rate margins by project type
Source: De Montfort University

22. Average LTV ratios by sector
Source: De Montfort University

23. Arrangement fees by sector
Source: De Montfort University

24. Interest income cover by sector
Source: De Montfort University

25. Lending intentions
Source: De Montfort University

26. Active Lenders
• AIG
• Aviva
• AXA
• Barclays Bank
• Bayern LB
• Citigroup
• Deka Bank
• Deutsche Bank
• Deutsche Hypo
• Deutsche Pfandbrief
• Deutsche Postbank
• Helaba
• HSBC
• ING REF
• Landesbank Berlin
• Lloyds Banking Group
• Met Life
• M&G Investments
• Royal Bank of Scotland
• Santander

27. Summary
• 2014 saw increasing capital values
• Overall level of property debt continuing to
decrease
• Property lending market is diversifying
• There will be no return to 2007/2008 lending
• Improving lending intentions
• LTVs 50% - 60%
• Equity seeking wealth preservation or high returns

28. RICS Matrics Series
Funding & Finance
Market Update
September 2015
Simon Wainwright BSc FRICS
J PEISER WAINWRIGHT
#CPDseries