The Cushman & Wakefield Corporate Finance team conducted research by speaking to 83 lenders to gauge their appetite for commercial mortgages in 2009. They found that 49 lenders were closed to new business, 22 were open but only for existing clients, and 12 were lending to both new and existing clients but with stricter criteria. Lending is focused on prime assets in Western Europe with long leases to investment-grade tenants. Loan-to-value ratios are lower but deals can still achieve good returns. The report provides an overview of active lenders' preferences on deal size, geography, capital sources, and pricing.

1. DEBT ADVISORY - LENDER SUMMARY REVIEW CUSHMAN & WAKEFIELD
For the second year running, the Cushman & Wakefield Corporate Finance team have spent the last 4 weeks personally speaking to each bank listed on our database to
gauge the level of appetite for commercial mortgages in 2009. This research exercise was a targeted and personalised approach to leverage on our strong relationships with
lenders.
The ‘credit crunch’ has significantly reduced the availability of debt financing for property transactions. Some banks who are over-exposed to the property market have
effectively withdrawn from writing new business The balance sheet lenders that are still lending to the market now have far stricter loan criteria and are demanding higher
margins and lower loan to value ratios. There are however pockets of capital available for the right deal. Market dynamics will lead decision making and banks will focus on
lending to experienced borrowers on prime properties let to investment grade covenants on long leases in Western Europe and other core markets.
The Corporate Finance Debt Advisory team began a market research exercise at the start of
14%
the year to gauge the level of appetite for commercial mortgages in 2009. This is an ongoing
exercise as lending policy is subject to constant change in these challenging market conditions.
The exercise has involved calling 83 lenders to determine their appetite.
The research outlines the following: type of lender, capital sources available, structure and
pricing and geographical focus
27%
59%
Of the 83 interviewed, 49 lenders are closed for business until further notice, 22 are open for
business and lending to new clients and 12 are lending to existing clients only.
Active - Existing Only Active - New Business Inactive
ACTIVE LENDERS - EXISTING ONLY
PREFERRED LOT SIZES
Almost half of the lenders that are working with exisitng clients can only underwrite deals upto
6
£20m. These banks will be honouring existing financing lines and reviewing re-financing
opportunities. This requirement is predominately driven by their credit committee who will
5
not want any additional risk or exposure to new clients in the current market. Upto £20m,
most banks will be able to hold this exposure directly on their balance sheets without
4
requiring any structured exit such as a syndication or securitization.
3
2
1
0
Upto £10m Upto £20m Upto £50m
ACTIVE LENDERS - NEW BUSINESS
PREFERRED LOT SIZES
The break down of lot sizes for new clients should be qualified to avoid any confusion. Some
12
of the 22 lenders spoken to would in theory only commit new funds to new clients based on a
number of conditions:
10
- Proven track record with pipeline of deals
- Provide wealth management services in conjunction with lending facility
8
- Pre-requisite to move personal and corporate banking facilities to new lender
- Proposed new borrower will need to be of a minimum net worth
6
- Additional recourse to balance sheet / parent company
4
We consider there to be up to 15 lenders who are actively lending to new clients without as
many pre-conditions. There is a distinct quot;flight to qualityquot; in the current debt market. You can
2
still arrange funding for experienced borrowers for prime assets with long leases let to
investment grade covenants.
0
Upto £10m Upto £20m Upto £50m
ACTIVE LENDERS - EXISTING ONLY
GEOGRAPHY
The majority of lenders who are committing funds to existing clients only are focusing on core
8
UK and Western Continental European markets including France and Germany. This reduces
7
their exposure to any new credit facilities as the majority of these loans will be honouring pre-
agreed credit lines to existing borrowers. In most cases, additional recourse may be required
6
such as cross collateralization to reduce the risk of any loan breaches.
5
4
3
2
1
-
UK ONLY WESTERN EASTERN AMERICA ASIA
EUROPE EUROPE

2. DEBT ADVISORY - LENDER SUMMARY REVIEW CUSHMAN & WAKEFIELD
ACTIVE LENDERS - NEW BUSINESS
GEOGRAPHY
For any new business lending, core western European markets feature on any lenders
16
requirements. If they are committing new funds to a new borrower they want to ensure they
are lending on prime assets with good property fundamentals.
14
12
Our research has also unravelled a shortlist of lenders who are committed to lending to new
clients in Eastern Europe only. A niche area where banks can charge high arrangement fees and
10
margins. Any new lending will be subject to the usual list of conditions. However, margins will
8
be materially higher in these areas.
6
We are aware of a number of sale and leaseback style transactions in Eastern Europe where
lenders of this nature will provide a useful financing option.
4
2
-
UK ONLY WESTERN EUROPE EASTERN EUROPE AMERICA ASIA
TYPE OF LENDER
The current lending market is dominated by balance sheet lenders. In recent weeks we have
ACTIVE - EO ACTIVE - NB heard that the Pfandbriefe market has re-opened with a particular over-subscribed issuance.
This is encouraging signs for a market that had until Q2 2008 been the most aggressive source
SECURITISE - 1
of funding.
SYNDICATE 2 6
BALANCE SHEET 11 21
GILT BASED - 2
BUILDING SOC 3 1
*EO - EXISTING ONLY , NB - NEW BUSINESS
CAPITAL SOURCES AVAILABLE
The active lenders are predominately senior debt providers on income producing properties.
ACTIVE - EO ACTIVE - NB
There is a handful of active development lenders in the market but their terms will be
SENIOR DEBT 11 21
conditional on a number of factors including: 100% pre-lets secured, good location, interest
MEZZ 3 4
shortfall account and an experienced property entrepreneur / property developer.
EQUITY 2 5
DEVELOPMENT 3 5
BRIDGE - 3
SHARIAH 1 -
*EO - EXISTING ONLY , NB - NEW BUSINESS
ESTIMATED LTV'S & PRICING
BASED ON A PRIME ASSET, 10YRS+ INCOME, INVESTMENT GRADE TENANT & EXPERIENCED BORROWER
Post ‘credit crunch’, the lack of liquidity has been a particular problem for high value portfolio
PRE-CREDIT CRUNCH NOW transactions. Larger transactions can only be financed through ‘club deals’ involving a number
of different banks. We are aware of at least 5 banks who can underwrite £50m and above.
LTV MARGIN LTV MARGIN
Lenders will remain cautious for the first half of 2009 focusing on quality assets, in prime
locations, let to investment grade covenants on long leases. The lack of credit approved debt
E. EUROPE 70-75% 1.30-1.50% 45-55% 2.50-3.00%
facilities makes it difficult to provide a narrow range on LTVs and margins for prime stock.
UK 80-85% 0.90-1.25% 60-70% 2.00-2.50%
Lending policy is constantly being reviewed which justifies the range in pricing. With prime
yields at current levels and the relative cost of debt being at historic lows, it is still possible to
W.EUROPE 85-90% 1.10-1.25% 50-60% 2.25-2.75%
achieve attractive geared cash on cash returns even at low LTV's. Sentiment is certainly
improving but investors must be willing to provide at least 30% of the capital structure.
CONTACT
For a more detailed review of our survey please contact any member of the Debt Advisory Team
Furthermore, if you are working on opportunities where your client is struggling to secure financing then please contact us:
EDWARD DAUBENEY
ed.daubeney@eur.cushwake.com
+44 (0) 207 152 5339
ANDREW CHRYSOSTOMOU
andrew.chrysostomou@eur.cushwake.com
+44 (0) 207 152 5343
CHRISTOPHER WEBB
chris.webb@eur.cushwake.com
+44 (0) 207 152 5795