CANNES, France (Reuters) - Barclays (BARC.L) plans to boost its domestic property lending in 2011, and expects to continue doing business in cities outside London in spite of the feared impact of public job cuts.
“We have the appetite to do more new lending to UK commercial real estate and to residential development this year,” Brendan Jarvis, head of Barclays Real Estate, told Reuters on the sidelines of the MIPIM property trade fair.
“We have already made a strong start for UK net new lending so far in the first quarter,” he said, declining to give specific figures on lending targets for 2011.
The bank, which had largely avoided a commercial property meltdown that hit many of its peers, renewed its focus on the sector in 2010 in a bid to wrest market share from rivals such as part-nationalised rivals Lloyds (LLOY.L) and Royal Bank of Scotland (RBS.L).
It also plans to continue lending in regions including Wales and Scotland, and in cities such as Birmingham and Manchester, although businesses overwhelmingly expect government cuts to hit the commercial property markets in those places.
“Those are very large cities and there are bound to be opportunities. Some areas are going to be more challenging and difficult, but if you look at residential development for example, there are a lot of people who want to take advantage of the supply and demand imbalance there,” Jarvis said.
The bank will also consider loans for deals on secondary property, even as the bulk of buying interest has so far focused on prime buildings in London, said Fiona Freeman, who heads Barclays Real Estate’s corporate loans business in London.
“We are willing to look at deals that involve a spread of risks -- for example a purchaser might look at an asset and say they can improve the voids to say 12 percent from 20 percent, we would consider it,” she said.
Outside the UK, Barclays Real Estate plans to further grow its investment banking business, particularly in the equity and debt capital segment of the market.
“Germany is an interesting market for us and we continue to spend a lot of time there. We’re also growing in other eurozone cities like (those in) France and the Netherlands,” Jarvis said.
One particularly attractive business, he said, is helping listed European property companies and real estate investment trusts issue convertible bonds, as they seek to lock in low interest rates by replacing bank loans carrying average terms of 3-5 years with 7-10 year bonds.
The bank will take a “wait and see” stance when it comes to the commercial mortgage-backed securities CMBS.L as it sees ongoing uncertainties for the segment, especially due to the Basel III banking rules on the treatment of securitised debt.
The property industry, hungry for new funding sources, has been hoping Europe’s lacklustre market for new CMBS will be revived by an expected Blackstone (BX.N) deal worth 360 million pounds, the first in more than three years. (Reporting by Daryl Loo; Editing by Andrew Macdonald) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)