Jones Lang, a unit of LaSalle Investment Management, is stepping forward to offer commercial property loans at a time when banks are tightening their lending rules. The company has already announced that it has funded six junior and mezzanine loans totalling £150 million ($316 million) and expects to increase this figure to £200 million ($421 million) by the end of June 2012. At this rate, Jones Lang is on its way to becoming the most active source of subordinated debt for commercial properties in the UK this year.
Lenders other than banks were responsible for funding a total of £339 million of junior and mezzanine loans in the UK in 2011 according to the results of a study released by De Montfort University. Since junior and mezzanine lenders are ranked behind senior creditors, if the property owner defaults on the loan, interest rates are generally higher than for standard financing. The typical rate which a commercial property owner is looking at paying is above 10 per cent for this type of mortgage
LaSalle Investment Management is one of the most respected real estate investment firms in the world. The company specialises in this niche market and has raised over £400 million over the past 24 months to fund loans.
Over the next 36 months, approximately £120 billion in commercial property loans will mature and need to be refinanced. As traditional sources of funding, such as banks, are pulling away from the commercial real estate market, new players step into the market to provide funding and get attractive returns on their investment. The bonus is that they are able to achieve these benefits with less risk than if they had decided to buy a commercial property personally.
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