LONDON, Jan 28 (Reuters) - Singapore’s sovereign wealth fund has backed a 1 billion pound ($1.6 billion) lending programme for British offices, shops and warehouse property that could bring much-needed funds into a debt-starved sector.
The Government of Singapore Investment Corporation, one of the world’s largest sovereign wealth funds, will underwrite the loans to be issued by commercial mortgage provider Laxfield Capital.
The programme targets lending of up to 1 billion pounds over the next 24 months, Laxfield Capital said in a statement on Monday.
Britain’s commercial property market has been forced increasingly to find alternative sources of finance in the past few years as banks grapple with stricter capital adequacy rules, slashing lending to the sector.
The scheme will provide individual loans of 40-185 million pounds with a 5 to 7 year maturity and a loan-to-value of up to 75 percent. It will issue whole loans and syndicate up to 75 percent of each mortgage to other investors, while GIC will retain a junior investment in each loan, Laxfield Capital said.
“The programme complements our existing direct junior debt investment strategy which we will continue to pursue,” said GIC real estate’s regional Head of Europe, Chris Morrish.
New lenders to the sector have been attracted to the high returns on offer, which can be over 7 percent for property loans made on a 75 percent LTV basis, far outstripping yields on the safest European government bonds.