Barclays has renewed its focus on the commercial property sector, bringing its real estate investment and corporate bankers under a single banner with a view to luring clients from embattled UK banking peers.
Britain's fourth-largest bank, which emerged from the global banking meltdown relatively unscathed by cutting its exposure to the commercial property bubble, wants to grow its real estate business by teaming lending veterans with its investment banking stars.
"The reality is that real estate companies ultimately want debt. That's the lifeblood," Brendan Jarvis, head of Barclays Real Estate, told Reuters in an interview.
"But what bank in the current market can write all that debt on its own without the benefit of ancillary business from a wider relationship with a client?"
At end-June 2010, Barclays' total commercial mortgages included loans of 6.13 billion pounds ($9.6 billion), down from 6.5 billion at end-December 2009, commercial properties owned of 1.3 billion pounds, and 196 million pounds of commercial mortgage-backed securities.
To grow this book, Jarvis said the bank would seek business with smaller property companies by issuing loans as low as 3-10 million pounds, with a view to building a client base that may lead to future flotations and build investment banking revenues.
"If you take someone from a private company all the way to a full listing, that's a lot of business we can do using the Barclays Capital, Barclays Corporate universal bank strength," said Jarvis, who has worked at the bank for 39 years.
Barclays is seeking to wrest market share from competitors in the UK, as part-nationalised rivals Lloyds and Royal Bank of Scotland remain hampered in their ability to lend as they sell assets to repay taxpayer-funded bailouts.
"Now is the opportunity for us to look to develop new relationships with those clients who are feeling nervous or let down when dealing with our competitors," said Fiona Freeman, who heads Barclays Real Estate's corporate loans business in London.
"The REIT (real estate investment trust) sector would be one," Jarvis said, pointing out another target market.
Barclays has recently initiated equity coverage of the UK listed property sector as part of a plan to extend its brokerage services across the industry.
"They (REITs) are more relationship driven than they have been in the past because they need the ability to maintain a core banking group to provide funds, and revolving credit facilities for example, over a number of years," he said.
By bringing real estate banking specialists from Barclays Corporate and Barclays Capital together, Jarvis hopes the bank can manage its liabilities more closely and avoid heavy exposure to a particular city or segment of the real estate market.
On the upper end, Barclays is willing to lend as much as 75-100 million pounds on single deal, "focused on lending against secure rental cash flows to provide a sensible interest cover", he said, reiterating aims to cater for all loan sizes and not just in the healthy London market.
"The regions in Barclays have not always been so closely aligned. So bringing them together, you not only get the consistency of message but also from my point of view you can see a portfolio emerging," he said.
"That way we know and can be proactive about the split of our portfolio across different sectors."