According to one property analyst HBOS has given both debt and equity support to commercial property firms and clients and was generally reluctant to take action against borrowers who breached their banking covenants with lenders.
But David Davidson, a partner at Cushman & Wakefield, warns that the new owners may not be so amenable. 'HBOS has equity stakes in high-profile companies, such as Miller and Cala. There are almost no property companies without exposure to the bank. The new owner may be more objective and want to sell those assets,' he said.
This could lead to more distressed stock coming onto the market. But this is seen by others as an opportunity, especially for those willing to buy at knockdown prices and might even help to stimulate the market.
Douglas Hunter, partner at law firm Dundas & Wilson, said one of the biggest sources of investment bargains will be forced sales by borrowers who have breached their banking covenants with lenders and this will create a pool of distressed commercial properties.
He expects most banks will take action against borrowers with broken covenants if the credit crunch continues. 'At the moment, banks think that distressing the properties may result in them losing more money than if they hold on to them. They may not be able to maintain that view if the current turmoil in banking markets continues,' he explained.
Another potential source of distressed properties is retail property investment funds. They experienced large outflows of money last year, leading to a number of firms, including Scottish Widows and Aegon, introducing redemption periods for clients wanting to withdraw their money.
The outflow has now stopped, but Hunter says if consumer sentiment changes again, funds may be forced to sell properties at a cut price to inject liquidity into funds. Potential investors looking for bargains include institutional investors, sovereign wealth funds, property companies with existing finance or lines of credit, wealthy individuals and recovery or vulture funds.