Commercial Property Lending - Are Loan Terms Dragging You Down?
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No-one in the commercial property market can fail to have noticed the dire state of commercial property lending supply over the last couple of years. But potentially even more hard-hitting for those with loans outstanding on their commercial properties, is the approach of the banks to the terms of those loans. Banks have started to use the details of those loan agreements in an aggressive fashion, to help reduce their exposure to the commercial property lending market. This has left many property owners in a very precarious position, and it is no wonder that some are looking at their options, and considering whether now is a time to sell.
Most investors in commercial property will have bought their property portfolio with the aid of commercial property lending, agreed with their lenders during the height of the property boom. With property values soaring, and credit both cheap and readily available, it was all too easy to give the loan to value provisions of the loan agreement only cursory examination. These aspects of the commercial property lending agreement allow the commercial property lenders to ask the borrower to repay the whole of the outstanding loan if the debt becomes too high a proportion of the current property value.
As commercial property values crashed over the 2007-8 period, those provisions of the commercial property lending covenant were not always acted upon by the banks. Although keen to cut credit risk from their books, forbearance seemed a better long term prospect for ensuring their commercial property lending books performed adequately, during such a severely tumbling market.
However, there are signs that the UK commercial property market, after 12 months of a steady recovery, is about to slide into a renewed depreciation. The latest report from the IPF Forecast has said: "The dip in capital values next year is now predicted to be worse than previously expected. The quarterly survey shows that all sectors . have seen downward revisions to capital value growth forecasts. Standard shops are expected to perform the worst, with forecast capital value falls of 2.4%" (IPF UK Consensus Forecast Survey).
There is every prospect that banks will be less lenient in interpreting the loan to value covenant breaches in outstanding commercial property lending, and may also be less willing to pick up loans due for refinancing. Their eyes are firmly on the more onerous capital requirements anticipated to be placed on them by the next round of the Basel process of bank regulation.
So where can those worried about their commercial property lending turn, if they want to avoid their hands being forced by their banks? One option increasingly being taken up is to sell now, direct, to release capital, and pay off debts - also known as degearing.
One committed new entrant to the direct buy market is SellMyCommercialProperty. We are a start up who have a significant amount of funds already allocated to buy commercial property. As a result we are able to position ourselves as a buyer of first resort- we can access our monies quickly to speed sales, are can then pay you a good market price. Simply fill out your contact details at SellMyCommercialProperty, and we will get back to you, and show you we can help you to resolve your difficulties with commercial property lending.
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