A BPF webinar this week discussed the outlook for the real estate finance market in the context of the current Covid-19 crisis. There was a general consensus on both lender and borrower side that, while lenders are not closed for new business, new lending has, for now, largely stopped and lenders are currently focusing on their relationships with present clients and managing their existing loan books. With the impact of the situation on existing loans remaining uncertain, lenders have taken the opportunity to pause and take stock in the short term.

There is some concern that the downturn may last longer than anticipated. Nevertheless, the webinar panel was of the view that, pre-crisis, the market was in a fairly robust position and we are therefore at a good “starting point” to be coming in to the crisis, in contrast to the position at the start of the global financial crisis.

The BPF welcomes the various support measures which have been introduced by the government so far and the panel was of the view that any further intervention scheme needs to incentivise landlords and tenants to work together and focus on the property ecosystem as a whole. The BPF has been in discussions with the Treasury and other officials and is confident that their concerns, particularly in respect of potential rent and service charge shortfalls, are being heard. It will be interesting to observe what, if any, additional measures are announced by the government and we will continue to monitor developments.

Lenders will also have a part to play as part of the real estate ecosystem. As noted in the latest Cass UK Commercial Real Estate Lending Report, lenders are facing headwinds and it is expected that a material amount of real estate loans may need to be written off as a result of the current situation. Nonetheless, as we have highlighted previously, it is encouraging that lenders have already started to work together with borrowers to find ways of meeting the challenges being faced. It was the view of the webinar panel that borrowers in the real estate sector are more likely to request repayment or covenant holidays from lenders. Whilst a number of such requests have already been seen by lenders to date, lenders will have an even bigger part to play as we approach the next quarter date in June.

The key message from all panellists on the webinar was that openness and collaboration between all parties was essential to come up with workable solutions to the challenges being faced. Lenders, landlords and tenants so far appear to be co-operating and taking a pragmatic approach to the current crisis.