Banks forced out of property sector, fund warns

By Ed Hammond, Property Correspondent

The head of the world’s largest manager of property funds has warned that the pressure being placed on banks by governments is forcing them out of the property market.

In an interview with the Financial Times, Brett White, chief executive of CBRE, which has almost $100bn under management, said that the scrutiny on banks, the traditional source of finance to the industry, was helping pave the way for a greater involvement of private equity funds.

“It is not that [banks] don’t want to play in the real estate market any more, but rather that they cannot as they come under so much scrutiny from their governments,” Mr White said.

The pressure on clearing banks, many of which are still nursing multibillion-dollar distressed-property loan books, has already led to some selling off or moth-balling of their commercial property divisions.

France’s Société Générale and Germany’s Commerzbank both announced a moratorium on new lending to the sector at the end of last year. Meanwhile, CBRE’s own purchase of ING Real Estate, which it bought from ING Group for $940m last year, had been driven by the Dutch lender’s desire to slash its exposure to the global property sector.

Mr White added, however, that the sell-off of non-performing property loans by US and European banks had not unfolded as many had expected.

“Logically, it should be a buyer’s market as the banks want to sell this stuff and there is a lot of money on the sidelines waiting to buy. But the armageddon people predicted hasn’t happened; the banks are not putting their foot down, but are instead selling slowly and very carefully,” he said.

On the prospects for the wider global property market, Mr White said that a quiet year would be a “wonderful result” for 2012, adding that low levels of new buildings coming to market in the US and Europe would lead to a surge in rents once the market started to recover.

CBRE, which is also the world’s largest property services group by revenues, reported a 15 per cent increase in revenues during the year to December 31 to $5.9bn. Net income for the period, after the costs of integrating ING, came to $239.2m, up from $200.3m in 2010. The increase generated earnings per share of $0.74, compared to $0.63