Ahoy there are ICEBERGS AHEAD

Most U.K. Commercial Property Loans Are in Default, CBRE Says
2009-09-22 12:32:26.35 GMT

By Chris Bourke and Simon Packard
Sept. 22 (Bloomberg) -- Most U.K. commercial property loans are now
in default after values slumped in the past two years, according to CB
Richard Ellis Group Inc., the world's largest real estate broker.
About 200 billion pounds ($327 billion) is needed to refinance
existing loans secured against 450 billion pounds of properties during
the next five to seven years, though only about half that amount is
available, the company estimates.
"Almost every senior, and every junior, loan is in technical
default," Robin Hubbard, a director of CBRE's real estate finance group,
said at a press conference today in London.
"There's limited financing available for new loans or refinancing other
people's loans."
Investors borrowed 360 billion pounds to buy stores, offices and
warehouses in Britain using about 90 billion pounds of their own cash,
according to Los Angeles-based CBRE. They now owe more than the
properties are worth after the global financial crisis ended the
market's five-year boom.
Average property values have fallen 44 percent since mid- 2007,
according to Investment Property Databank Ltd.
Banks are choosing to extend most of the 45 billion pounds of
commercial real estate loans due to mature this year, though only for
short periods, Hubbard said. This is only deferring the defaults, he
said.
The biggest challenge facing owners of U.K. commercial properties
is the leasing market, which "could be the straw that breaks the camel's
back," Hubbard said. The recession and rising unemployment are leading
to more vacancies and fewer tenants.
"Nobody's going to throw money in to get things back, unless it's
for new, nice, prime kit," Hubbard said. "There's only so much magic
dust you can sprinkle on the rubbish stuff."

For Related News and Information:
For more U.K. real estate news: TNI UKECO REL <GO> CMBS loan reports:
LRP <GO> Real estate resources: RE <GO> Top Bloomberg News bond stories:
TOPH <GO> Top Bloomberg News real estate stories: TOPR <GO> Stories on
banking: NI BNK <GO>

--Editors: Anne Pollak, Ross Larsen

To contact the reporter on this story:
Chris Bourke in London at +44-20-7073-3808 or cbourke4@bloomberg.net.

To contact the editor responsible for this story:
Alan Mirabella at 1-212-617-4149 or amirabella@bloomberg.net.