The run on British property funds has drawn attention to the vulnerability of the commercial real-estate sector, which is largely funded by domestic banks and building societies, but increasingly by foreign banks and insurers.
UK banks and building societies had about £90 billion (US$117 billion) in credit extended to domestic commercial real estate at the end of last yer, according to a study by De Montfort University.
German, other international and US banks had £55 billion of exposure, having increased their investments in the sector since the 2008 financial crisis. Insurers, which prior to the crisis had barely any exposure accounted for £25.9 billion.
Photo: AFP
This means they could all take a hit if Britain’s vote to leave the EU leads to a slowdown in business investment and depresses demand for offices and shopping centers.
“There is a lot of uncertainty at the moment,” said Sonja Knorr, a funds analyst in Germany at ratings agency Scope. “Transactions in the UK have come to a halt.”
The total value of UK outstanding commercial real-estate debt, stood at £183.3 billion as of Dec. 31 last year, the De Montfort study said.
The uncertainty has already caused panic among some commercial property investors.
In the past week, more than £18 billion of investor cash in commercial property has been frozen as funds run by M&G Investments, Standard Life Investments and Threadneedle Investments, among others, suspended trading.
While ordinary retail investors stand to lose most initially, some funds have been paring back the value they put on their property — a signal that a price drop is likely. That would hit the banks that lent or insurers invested in property.
Legal & General’s fund arm and F&C Investments on Thursday both cut the value of their UK property funds to discourage withdrawals.
“Property is so much about confidence,” said Danny Cox of broker Hargreaves Lansdown. “Once you have this kind of dent, it will take a time to come back.”
While UK banks’ exposure to the sector is high, accounting for 45 percent of lending last year, according to the De Montfort Commercial Property Lending Report, it is down from over two-thirds a decade ago.
For some foreign lenders, commercial property might still be attractive proposition because of the fall in the value of the pound.
“A 17 percent fall in the value of sterling makes investments in Britain interesting, despite the Brexit. That goes for UK property as well, an area we are now looking at,” said Andreas Gruber, chief investment officer of German insurer Allianz, which is responsible for investments of 640 billion euros (US$708.7 billion).
“The lower value of the currency offers an attractive discount,” Gruber said.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”