US banking giant Wells Fargo plans move into UK social housing

“As a lender we’re always keen to strengthen our business and balance sheet, and where possible, complement our service offering with what we do in the States,” she said.

News of the San Francisco-based bank’s prospective move into the market comes after a flurry of new global entrants, including from Australia and Japan.

Social Housing exclusively revealed last month that National Australia Bank has launched into the sector with £250m of deals.

It also comes as a number of US investors enter UK social housing through the private placement market. Social Housing revealed that both Bromford and Network Homes have closed innovative funding deals at low rates.

As one of America’s top four banks, Wells Fargo set out its stall in 2013 with the acquisition of Commerzbank’s Hypothekenbank Frankfurt (formerly Eurohypo) UK commercial real estate portfolio, taking on £4bn of commercial real estate loans “comprised of high-quality institutional assets throughout the UK with a focus in London”.

It set up a new headquarters in the City last year, marking its first international real estate purchase outside of the US. Frank Pizzo, regional president for EMEA, described it as a “significant milestone” for the bank in demonstrating its commitment to the UK.

Its UK commercial real estate team said the move into social housing is a “natural progression” after its lending into student housing and the private rented sector, such as being part of Quintain’s £800m lender line up for its Wembley regeneration.

Ms Flor added: “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.”

It also intends to have a long-term commitment in commercial real estate, lending through the cycle with a “considered approach [which] means we won’t be coming in and going when we don’t get pricing”.

The bank will take a “very disciplined” approach and plans to supplement rather than change the UK market, she added.

Wells Fargo remains one of the leading lenders in America’s 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 multibillion-dollar fine for its role in the sub-prime mortgage market in the run-up to the financial crash.

Asked for a view on increased political and housing policy risk in recent years in the UK, 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 rather than saying ‘this is more preferable’”.

She said political risk has always been an “integral part of the sector”, adding that uncertainty in the UK represents “new events rather than new risks” and that the team has done a lot of work on the sector.

They have also assessed development risks as a growing part of the HA profile, particularly with the amount of pressure providers are under to build more and fund themselves.

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

Across UK commercial real estate, its loans are typically greater than £20m, with a range of products including development finance, corporate facilities, floating and fixed rate loans and services across debt capital markets, and derivatives.

Ms Flor said: “We’re not here to change the market, we’re here to enhance the market in line with our regional capabilities.

“What we do know is that there are quite a lot of established sets 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.

“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.”