Skip to main content

The banking crisis hits commercial landlords.

 

Index
Share prices in London’s big listed property companies have been hit as the repercussions of the banking crisis that began in California begin to make themselves felt in the UK. British Land, the owner of £10 billion of offices, retail parks and warehouses, saw its share price drop by 13 per cent in March, as did LXi Reit, owner of the land that Thorpe Park in Surrey and Alton Towers in Staffordshire sit on. The stock of the shopping centre specialist Hammerson fell by 14 per cent. The MSCI Europe Real Estate Index, which tracks the share prices of European property companies, hit its lowest level last week since 2009 and the aftermath of the global financial crisis.

The effect of a creaking banking system on the UK commercial property market is indirect, John Cahill, a real estate analyst at Stifel, the US investment bank, said. Cahill’s base case is that a full-blown banking crisis is avoided, although stock market investors seem less convinced. Such a crisis, if it came, would probably result in banks reining in lending when commercial property values are falling rapidly. They have declined by 10 per cent from their peak last summer, according to the MSCI Europe quarterly property index.

The chief executive of one big commercial property landlord explained how that combination could affect those with loans that are about to mature and need refinancing. «Let’s say you bought an office building for £10 million five years ago. You’d have been able to borrow £6 million. When you ring up the bank, they might lend you 40 per cent against an £8 million valuation, just over £3 million. »

Now, most are at 30 per cent, if not lower. A vital feature of this downturn has been the rapid writedown in commercial property values, which reflects the listed companies’ healthier balance sheets. «In a market where everyone’s highly leveraged, companies are all incentivised not to adjust their valuations because they’ll default on their bank debt,» Ben Green runs Supermarket Income Reit, which owns £1.2 billion of supermarkets across the UK, said. As a result, the feeling in the City is that the listed landlords look capable of withstanding the turmoil in the commercial property market.

www.sba.tax


Labels:

Comments

Post a Comment

Cloud Bookkeeping

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...
Post a Comment
Read more

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...
1 comment
Read more

India- UK trade deal.

  According to India's top trade official, talks with the UK regarding a trade agreement are progressing well, despite obstacles related to temporary work visas and the opening up industries like automotive and spirits. The Commerce and Industry Minister, Piyush Goyal, explained that India is seeking transition periods or greater market access in specific sectors due to its economy, which is slightly larger than the UK's and expected to outgrow it in the coming decades. If a trade deal is reached, it would be one of the most significant agreements for Britain since leaving the EU, and it would also be necessary for India, which surpassed the UK as the fifth-largest economy last year. Goyal stated that India aims to increase its economy from $3.5tn to $35tn by 2047, the country's centenary of independence. According to officials and diplomats in India, talks about a proposed trade deal may be finished by early September, just in time for the G20 summit in New Delhi. Nigel Hu...
Post a Comment
Read more