In the years since the Global Financial Crisis, the role played by non-bank lenders in European, and especially UK, real estate finance markets has increased significantly, as a result of a number of factors.
Many banks have narrowed and/or reduced their appetite for real estate exposure (often in response to regulatory pressures), with the result that many real estate investors find it difficult to secure finance from that traditional source.
In the extraordinary monetary and macroeconomic conditions that followed the GFC, large amounts of fixed income capital were attracted by the risk/return combination offered not only by real estate, but also by real estate credit.
The hostile environment created by European regulators for CMBS, notably for insurers subject to the standard formula for the solvency capital requirement (SCR) under Solvency II, led many firms to set up their own lending platforms or allocate capital to third party managers. Many of these new lenders began life entirely equity funded, but now use leverage (loan-on-loan, warehouse lines or repo finance).
This part of the market now feels like it's here to stay, structurally important, adding diversity and resilience from a financial stability perspective, as well as choice and competition for real estate investors and debt investors alike.
We have had a few meetings in recent years to explore whether there may be something useful to be done at a collective level to support and promote alternative lenders - but for now, there is no active group in this area. If you have ideas, please contact David or Peter.