SPLASH Newsletter - April 2014

Property lending surge

Lenders have rediscovered their appetite for commercial property loans. Loan originations for the 6 months to June 2013 might have only run at a level similar to 2012 (De Montfort Survey) but since then talk in the market place is of increased activity and pressure within organisations to increase CRE exposure. When full year figures are reported in May, expect a significant increase. Some of this is driven by lack of appetite for loans in other sectors and the need to find profitable business. Margins are reported to have peaked in 2012 and declined steeply since and they are continuing to fall, albeit the market is polarised. There is too little competition from new lenders in the sub £10 million market to move margins down much more. Many lenders active in this part of the market still suffer from legacy issues. Being almost exclusively UK domiciled, they have adopted the new “slotting” regulatory regime which is having a constraining effect on LTVs. Margins are typically 2.5-2.9% p.a. Arrangement fees are trending down to 0.75-1.25%.

Conversely the market for £20 million plus loans is healthy with plenty of new market participants including foreign lenders with different regulatory regimes, driving up LTV’s and reducing margins. Margins are more competitive, typically in the range 1.85%-2.5% p.a. We expect this trend to continue. Development finance is also more available with margins coming in at around 3%-4%.

Overall the loan book shrank during 2013 but we expect it to increase in 2014.

AIFMD, fund managers & depositaries

With the introduction of the Alternative Investment Fund Managers Directive which is effective from July this year, new private investment funds which are not exempt joint ventures for AIFMD purposes, will require a fund manager. Depending on size, the fund will need to be managed either by a small authorised/registered manager or if larger than €100 million with gearing, or €500 million without gearing, a full scope authorised fund manager.

Smaller funds will require an FCA authorised operator in addition to appointing a small authorised /registered fund manager. We already manage Alternative Investment Funds, and await a variation of permission to act as a small authorised fund manager.

We are able to act as an AIFM on a seamless basis for any new fund thinking of establishing itself from now. We have decided to offer this service only to ungeared funds, or to funds with ring fenced debt. In addition, being an established fund operator, we can offer a “one stop shop” for both the regulatory roles required by a small private investment fund.

Separately, we have submitted a variation of permission application to become an authorised depositary for those funds which, on account of size, require a full scope manager. We will offer this service to larger AIFs in order to satisfy their obligation to appoint a depositary.

Kingfisher Property Partnerships Limited
Kingfisher Property Trustees Limited
Both Authorised and Regulated by the Financial Conduct Authority

Regional Office Portfolio

Higher LTVs are achievable even for secondary property. We have arranged a facility representing circa 70% LTV secured against a secondary regional commercial portfolio. The portfolio of 3 properties includes a serviced office centre and B8 unit with specialised use.

Richmond Town Centre, Retail Investment

This town centre retail property was let to 2 weak covenants with short unexpired lease terms but in a prime pitch. We raised over £3 million representing 55% LTV. The lender took comfort from the underlying strength of the location and prime pitch in order to provide this level of gearing.

The team

The information contained in this communication is intended to provide Kingfisher Property’s clients and contacts with a brief update in relation to the topics covered. The information and opinions expressed in this communication do not purport to be definitive or comprehensive and are not intended to provide professional advice.