A top Lehman Brothers real estate fund manager today predicted an extended period of pain for the property industry, with property lenders set to be particularly badly hit.
Gerald Parkes, managing director of Lehman’s London Real Estate Private Equity Group, said at today's IPD/IPF conference that the spree of new funds that had fuelled the growth of the market was set to dry up.
The big question
'Fear is stalking the streets,' he said, 'and if you thought it was going to get better by now, think again. Will banks be back in business in January? That is the big question.'
He said, although financial market conditions made it more profitable for banks to lend again, because of higher margins the banks who had started lending into property at the top of he cycle were in 'huge trouble'.
'Those in the biggest trouble are those that haven't been a real estate lender for a long time, so didn't have the relationships, so had to compete aggressively for the business,’ he explained. ‘Also those who forgot that its a moving business and kept assets on their balance sheet. We have seen writedowns but these still have a lot further to go,' he warned.
On a brighter note, he pointed to an imminent commercial mortgage-backed security (CMBS) issue from Lehman Brothers, Windermere XIV, as a positive sign that debt markets were opening up. 'We will get it away,' Parkes said. 'We won't make the margins that we normally make but if we get it away it will show that there is still an underpinning market.'