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‘Big four’ US bank courts housing associations over UK market expansion

A leader in the US affordable housing market plans bonds and private placements for UK associations as a “natural progression”.

One of the biggest lenders in the US affordable housing market sees expansion into UK social housing as a “natural progression”.

Wells Fargo – one the ‘big four’ US banks – is looking to arrange bonds and private placements for housing associations that Stacey Flor, managing director in UK commercial real estate, said it had spent “a lot of time establishing relationships with”.

In the US, San Francisco-based Wells Fargo remains one of the leading lenders in the affordable housing market, working with non-profit and for-profit developers and investors, along with Fannie Mae and Freddie Mac loan programmes.

Last year, it became the latest lender to face a multi-billion dollar fine for its role in sub-prime mortgage market in the run up to the financial crash.

Ms Flor said that with a strong balance sheet and one of the best credit ratings in the real estate sector, Wells Fargo can “potentially unlock” quite a bit of capacity that the sector is in need of right now.

The UK sector has seen increased interest from global finance, most recently the National Australia Bank confirming some £250m of deals.

In 2013, Wells Fargo acquired Commerzbank’s Hypothekenbank Frankfurt’s (formerly Eurohypo) UK commercial real estate portfolio, taking on £4bn of commercial real estate loans pitched as “high-quality institutional assets throughout the UK with a focus in London”.

Last year, Wells Fargo set up a new HQ in the City, a first international real estate purchase outside of the US recognised as demonstrating a significant commitment to the UK.

A move into social housing is seen as a “natural progression” given the bank’s lending into student housing and the PRS.

‘’We have a meaningful presence in other sectors and we expect that if the appropriate opportunities arise, [social housing] will become a meaningful part of our book as well,” said Ms Flor.

Ms Flor said the lack of a legacy book means Wells Fargo can look at the sector and its risk profile “with a fresh pair of eyes”.

Development risks have also been assessed in relation to the housing association profile, with a particular emphasis on the pressure providers are under to build more and fund themselves.

Wells Fargo’s lending platforms include secured finance on a non-recourse project basis, and a corporate platform through which it has provided lines to listed companies and real estate investment trust (REITs).

The bank can offer corporate-style revolving credit facilities and development finance and has provided unsecured loans to UK REITs.

“What we do know is that there are quite a lot of established set of covenants, pricing and mechanisms across all [existing] lenders and we need to be conscious that we have to be of the market and complement the needs of market participants,” said Ms Flor.

“We are not looking to change the rules of the game…and we need to make sure it fits with our strategic and risk appetite.”

Source: By Bill Tanner


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