Debt finance: no time to be ‘kissing frogs’

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Pricing corrections in the UK Retail Property market are creating opportunities for investors but the comparative lack of debt finance is hampering the execution of transactions. Continued negative sentiment towards the retail sector will undoubtedly – in the case of some assets – cause an over-correction in pricing. This will be exacerbated by some of private equity buyers who entered the retail property sector 4-5 years ago now looking to exit the market and doing so at greatly reduced valuations.

To take advantage of the opportunistic situations that these trends will present, investors will need to have debt finance secured on terms which add further competitive advantage to their investment. As in 2008-09 when there was a profound pricing correction, it will be essential to move quickly in the market. The same scenario is likely to be played out once we have a Brexit resolution.

Debt finance: no time to be ‘kissing frogs’

Colliers’ Head of Retail Capital Markets, James Watson, comments: “Lessons have been learnt from the last credit crunch and how it became such a roadblock to investment activity. Switched on investors realise that this time around they need to have open lines of finance if they’re going to be able to secure the best assets”.

Whilst there is a comparative dearth of debt finance available in comparison to the period prior to the financial crisis, there are still lenders active in the sector.

However, the days of the generalist lenders who would look at providing finance across the different commercial property sectors are pretty much over. So it’s not uncommon today to find a lender who is running a substantial commercial property loan book but will be completely out of particular subsector like retail.

There are debt providers who are active in the retail property sector but identifying them and meeting their criteria is a precise process. Vital time can be wasted through approaching lenders only to find that they are not active in the sector or that, if they are, their terms are not the most competitive.

We provide Debt Advisory consultancy which cuts through the ‘noise’ of the lending market and connects clients with the finance which aligns with their strategic goals. As the debt and financing space grows increasingly complex with new lending solutions, we improve financial performance for clients through specialised debt advice and bespoke loan solutions.

We work with a growing number of specialised lenders from the clearing to challenger banks on loans from sub-£10m through to £100m and above.

Having an advisor who can effectively identify potential funding partners is essential. It’s not a time to be, as it were, ‘kissing frogs’ in the hope that they can come up with the finance you need. It’s imperative that the process starts with lenders who are already open to the growing opportunity in the retail property sector.