Global property debt funding gap narrows -DTZ

SYDNEY Tue Nov 8, 2011 1:10am EST

SYDNEY Nov 8 (Reuters) - The amount of global property debt that could face refinancing problems in the next three years fell 27 percent to $142 billion over the six months to November, property research firm DTZ said on Tuesday.

It said loan sales were picking up and there was sufficient equity to cover the funding gap, which it defines as the difference between the existing debt balance secured by commercial property as it matures and debt available to replace it.

The United Kingdom has the largest absolute debt funding gap at $44 billion, DTZ said.

The funding gap has been identified by some investors as an opportunity to acquire distressed assets at a discount.

Last month, Blackstone Group LP and Wells Fargo & Co teamed up to buy a pool of about $600 million in U.S. commercial property loans from Allied Irish Banks Plc , according to a Reuters source.

DTZ said property debt has drawn strong interest from sovereign wealth funds and institutions, which could trigger lower discounts on the increased number of loan portfolio sales.

"More recent loan portfolio sales have attracted discounts in the region of 20-30 percent, lower than many opportunity funds were targeting," Nigel Almond, associate director of forecasting & strategy at DTZ, said in a report.

"The recent increased interest from sovereign wealth funds and institutions is likely to have played a role in this," he added.

Overall, there is $399 billion of new equity available, sufficient to bridge the funding gap, DTZ said.

Insurance companies have also become increasingly interested in entering the lending market, offering new lending capacity of about $150 billion over 2012 to 2014, the firm added.

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