Momentum building for distressed sales – LSH
Lambert Smith Hampton reports that distressed sales are gaining pace in the UK, with distressed investment transactions accounting for just under £1bn of the £6.6bn seen in the second quarter of this year. The firms’ UK Investment Transactions research for Q2 2011 shows that more than half of the distressed assets sold during the quarter were in the UK regions. However, in terms of value, more than 90% of the total came from deals done in London.
Ezra Nahome, CEO of LSH, says banks have been consistently reducing their exposure through consensual sales, but during the quarter there was also an increase in receivership disposals and the firm expects this to occur more and more during the next year. “The banks have focused considerable resource at their loan book and, given they have their ‘arms around the problem’, decisions are definitely being taken to sell,” he added.
The £6.6bn of investment transactions recorded in Q2 compares with £8.4bn in the first quarter, but that first-quarter figure includes the sale of the Trafford Centre for £1.6bn. Central London and South East office space remained dominant, with 30% and 50% growth in investment activity respectively, LSH notes. “Central London offices continue to be the lead indicator for the whole of the UK commercial property market with yields now below 5%,” the firm points out. This low yield demonstrates that investors regard the Central London market as a safe haven and shows the finite number of quality assets in the market, Mr. Nahome noted.
During the second quarter, investors continued to show interest in the distribution warehouses and logistics markets, as they did in Q1. High-street shops were, as expected, the weakest performers in Q2, LSH says, while retail warehousing bucked the trend and was highly sought after – second only to Central London offices.
