Hedge Funds are Now Lending Directly to Property DevelopersLed by office buildings and warehouses, British commercial real estate values rose for the fourth straight month in August, Cheyne Capital Management (UK) LLP and Insight Investment Management Ltd. are among investors making loans.
Firms started by former JPMorgan Chase & Co. banker Bill Winters and hedge fund manager Alistair Lumsden are raising money to lend, according to two people familiar with the matter.
Europe’s 2007 real estate crash triggered a wave of defaults that crippled the region’s commercial mortgage-backed securities market. Annual CMBS sales have averaged about 3.7 billion euros ($5.1 billion) since 2009, down from 39.9 billion euros in 2007. At the same time, banks recovering from the financial crisis and adapting to new capital rules have pulled back from property lending. Money managers, seeing an opportunity to profit, are moving into the lending void.
“Banks are shrinking their lending businesses and the CMBS market is not functioning,” said Graham Emmett, a London-based partner at Cheyne, which oversees $6.5 billion of assets. “There is an opportunity for non-bank lenders to step in and buy distressed loans or make new loans.”Source: Financial Post