LONDON, Jan 13 (Reuters) - Close Brothers said on Tuesday that investors and banks exposed to UK commercial property face massive losses and debt refinancing bills over the next four years, warning this may cause a second credit crunch.
The British investment bank said the total value of the UK commercial property market could drop by a further 140 billion pounds ($209 billion) by 2012.
It also estimates that banks are exposed to 250 billion pounds of UK commercial property debt, of which 50 percent needs to be refinanced by end-2012.
"The scale of this issue has not been fully appreciated and is likely to trigger further write-downs and, combined with the impact of a worsening wider economy, a second credit crunch in due course," Close Brothers said in a statement.
The investment bank predicts that by the time the market has bottomed in late 2009 or early 2010, pricing will have fallen by up to 60 percent, as lack of debt and equity financing means any property sold can only realise distressed values.
"Alternative solutions to restructure the indebted sector are required this time round, for example debt conversions, new third party investment or partial asset sales," said Gareth Davies, Close Brothers' head of European restructuring and debt advisory division.
UK commercial property prices fell 26.8 percent in 2008 and have plunged 35.5 percent from their summer 2007 peak, according to data published on Friday by the world's biggest property broker CB Richard Ellis.
(Reporting by Daryl Loo; Editing by Rupert Winchester)
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