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Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Euro suffers worst month against the pound since financial crisis

Political risks are still all the rage in the currency markets. The euro has suffered its worst slump against the pound since 2009 in November, as investors hone in on a series of looming battles between eurosceptic populists and establishment parties at the ballot box. The single currency has shed 4.5 per cent against sterling […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Banks

Carney: UK is ‘investment banker for Europe’

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Categorized | Insurance, Property

L&G enters property lending


Posted on April 30, 2012

Legal & General has made its first foray into property lending as the insurer bids to take advantage of the gap in the market created by the retreat of bank finance.

The company will announce on Tuesday that it has agreed to provide Unite, the UK’s largest developer and manager of student housing, with a £121m loan. The move is the start of what L&G hopes to build into a multibillion-pound lending business.

    It is the latest example of an insurer looking to get a foothold in the real estate financing market. The appetite among banks to hold debt secured against property has dwindled during the past two years, as overexposure to the sector and regulatory changes put pressure on new lending.

    The loan also marks a watershed for L&G, which first looked at the idea of commercial property lending almost a year ago but pulled back amid worsening market conditions. The insurer held negotiations with 150 prospective borrowers before agreeing with Unite. L&G is looking to make another property loan in the coming weeks.

    Ashley Goldblatt, head of commercial lending at L&G Investment Management, said the company had looked at applications that could not get lending from the banks. “We looked at a lot, but you have to wait for the right one to come along and then grab it. It is a bit like marriage.”

    He added that L&G would target medium to long-term lending agreements where it could negotiate fixed rather than floating-rate repayments to match its long-term liabilities. The property lending business will be entirely financed by policyholders’ funds.

    The loan to Unite, which is secured against a portfolio of student dormitories in London, Manchester and Bristol, represents a 60 per cent loan to value and is fixed at 5.05 per cent for 10 years. The cost of the loan is below the 5.7 per cent average Unite pays for its debt.

    Joe Lister, Unite’s chief financial officer, said securing the loan was a testament to the strength of the company and marked an important step for it.

    Insurers are tipped to become an important force in the property lending market this year and next as regulatory changes force banks to pull back.

    Reforms being ushered in under Basel III – the third accord in a sequential updating of global banking regulation – will increase the cost of capital banks must hold against commercial property loans.

    Both Aviva and Prudential, two of L&G’s UK rivals, already have property lending businesses.