21 April 2020
Coronavirus: Impact on Secured Finance and Real Estate Investment
SC&W’s Secured Finance and Real Estate Development team undertake a broad cross section of work and we see what is happening day to day in these sectors. We feel that a great deal of current commentary is overly negative.
Our clients range from both private and public banks, short term lenders and a range of active investors including family offices and larger investment institutions.
Generally, clients now seem to make their decisions with an added degree of caution having one eye on the immediate effect of the current lockdown and a medium/longer term view of the wider impact on the economy coming out of lockdown. However, the majority of lenders remain of the view that this is likely to be a short term issue.
Responses generally depend on the type of client and the markets they operate in.
- We have seen some investors putting transactions on hold but our experience is that most of the transactions that we were progressing prior to lockdown have been subsequently progressed and completed.
- We have had very few investors withdrawing from transactions. Most deals that were agreed prior to lockdown which were either being financed in cash or where a Bank was committed to funding a transaction has been progressed and or completed.
- Initially, when the lockdown was first announced, we did see transactions taking longer to complete, but recently we have seen the speed at which matters are progressing revert to normal levels. This may have been in part caused by the transition to home working.
- Valuation has proved to be a significant issue. Not only is it proving very difficult for valuers to obtain access to properties to undertake new valuations, but the market disruption has made the process of valuation itself difficult in many sectors particularly providing likely comparables for valuation.
- Lending institutions generally are proceeding with facility offers already issued. Very few offers are being withdrawn. Some short-term offers have been withdrawn given the likely delay in the exit event and redemption timeframe.
- There has been some opportunistic lending in the market with other lenders stepping in where short-term offers have been withdrawn. Such lending typically offers a 6-12 month term at slightly higher interest rates, but does suggest a degree of confidence towards the future.
- There has already been some opportunistic investment. Several new transactions have been agreed or re-agreed at reduced prices.
- We are already seeing overseas investors returning to the market. Often these investors are more comfortable acquiring investment properties without undertaking a viewing. A number of our clients have acquired assets in the last 3 weeks on an expeditious turnaround at reduced prices from institutions and firms seeking to enhance their liquidity.
It is our experience at the moment that whilst new transactions have reduced, transactions are still being agreed and so the market remains relatively active.
The continued shuttering of many real estate agencies will however inevitably have a significant impact should the closures continue beyond the current 3-week lockdown extension.
As a firm we have invested heavily in up to date working practices and computer systems and as a practice we have had the ability for fee earners and other staff to work seamlessly from home from the outset. We have therefore been able to adjust very quickly to the conditions we are all experiencing during this period of lockdown without any issues. Accordingly, we are progressing matters as expeditiously and efficiently as we always have and we are doing everything possible to best serve our clients’ interests in this difficult time.
Should you have any questions, please do not hesitate to contact one of the team.