The Debt & Structured Finance team at Cushman & Wakefield is in frequent contact with over 50 lenders and has inquired what the impact of Covid-19 developments is or is expected to be on lending activity.
Received feedback is very diverse, from lenders stating they are open for new business to some large lenders pulling back completely to focus on their existing loan book. It is also noticeable that sentiment is shifting quickly.
Most lenders are still able to originate at this stage. However, all are expressing even more caution than usual in retail, hotel and leisure financing. In addition, the financing process will take longer as people are working from home.
When looking at the current cycle, most European lenders within real estate have acted conservatively, with leverage typically low across the market. Nonetheless, given a considerable amount of loans were issued against top-of-the-market valuations, these are susceptible to valuation shifts and LTV covenant breaches (Interest cover, Debt Yield and LTV) are likely to occur.
Despite premiums rising to price in the additional market volatility, origination is still possible for now. Cushman & Wakefield will continue to do its utmost to find the best debt solutions available during this unprecedented time.