New debt provider Tyndaris closes €64m German mezz deal

Alternative commercial real estate lending specialist Tyndaris Real Estate said earlier this month that it had closed its third debt investment, a €64m mezzanine loan secured against a portfolio of three German offices. Overall, the company said it has now closed deals worth €90m of debt capital since last summer, secured by €420m of office, retail and residential real estate assets, making it a notable new entrant to the alternative new lending sector.

On its latest deal, two of the office properties are in Frankfurt and the third is in Berlin in an unidentified portfolio valued at €330m. Annual rent on the fully-let portfolio is said to be €29m, with average unexpired lease terms of more than 10 years.

The company, which has only been actively lending and investing since last July, is the real estate arm of UK-based Tyndaris LLP, an advisory business founded by Raffaele Costa, a former partner at hedge fund GLG. The real estate division is led by former Deutsche Bank executives Clark Coffee and Heath Forusz, and focuses on originating senior, mezzanine and preferred equity investments backed by performing assets – initially in the UK and Germany.

Describing the business, Forusz said the company had the flexibility to invest across capital structures, asset classes and jurisdictions in Europe. “We provide capital where, for the most part, the banks cannot due to regulatory and balance sheet constraints. We continue to find attractive debt investments and have maintained a robust pipeline of opportunities despite increased liquidity in the sector. Given the size and diversity of the European market opportunity, we believe this will continue to be the case.”

“The Tyndaris Real Estate team has completed three excellent deals that demonstrate their ability to source and execute on opportunities that meet the investment criteria for our capital, all within a short timeframe,” said Raffaele Costa, CEO of parent company Tyndaris. “The structural imbalances that exist in the European commercial real estate market, combined with the resilience of real estate as an asset class, make this a particularly attractive opportunity both on an absolute and relative basis in comparison to other alternative investment products.”

Last year, as more new entrants started to emerge to address the funding gap in commercial real estate across Europe, along with the return of some traditional lenders – albeit at much reduced levels – Tyndaris Real Estate founder Coffee said, “This increased liquidity is a positive development for the market, but it remains a drop in the bucket compared to pre-crisis lending levels. When I speak with many of my clients who are looking for leverage, they continue to struggle to find credible financing solutions for all but the most prime assets or markets.”

While many of the new entrants providing debt liquidity are focused on senior lending, this is having the effect of increasing overall lending volumes, lowering the pricing of senior debt as more competitors enter the field, and more transactions. Coffee said this is where his business comes in: “You need to get the senior debt right in a deal before the rest of the capital structure can make sense. If borrowers have greater access to senior debt at lower pricing, this facilitates greater use of mezzanine and other forms of subordinate capital in their deals.”

Coffee cited (at the time) the company’s first deal last year as evidence of this. “We recently closed an investment related to an acquisition of good quality Berlin multi-family residential assets. We are earning about a 15% annualised return for 62% to 78% LTV risk, on one of the most stable asset classes anywhere.”