News from the debt markets recently largely concerns LaSalle Investment Management’s first close for its latest debt fund, and the entry into the European debt investing market after taking over the real estate financing business of Swiss asset manager GAM.
LaSalle Investment Management announced the first close of its LaSalle Real Estate Debt Strategies IV (LREDS IV), the fourth fund in its debt strategies series, with €435m of aggregate commitments. This puts it on track to achieve a total capital raise of €1bn ($1.2bn), with commitments from both existing and new clients to the LREDS series, across a broad range of European and Asian pension funds and insurance companies.
LREDS IV’s investment strategy focuses on mezzanine debt investments secured on real estate across western Europe with a focus on Germany, the Netherlands, UK, France and Spain. The debt fund also offers whole loans, capex and development financing solutions.
LaSalle’s European Debt & Special Situations platform has been investing across both traditional asset classes such as office, logistics and residential, as well as alternative asset classes such as student housing and self-storage. Since 2010, the platform has invested €3.4bn in investments across 78 transactions.
Ali Imraan, managing director and fund manager for LREDS IV, said: “We continue to see strong demand for LREDS IV from investors who are attracted to the downside protection in light of the uncertainty due to the pandemic while still aiming to generate healthy current returns…We are already seeing some compelling opportunities given that the traditional banks remain relatively cautious while it also allows us to wait and take advantage of any dislocation opportunities that arise from the current uncertainty.”
Amy Klein Aznar, head of debt & special situations for LaSalle Investment Management, said: “The team has already completed several debt investments this year, working with strong sponsors and senior banking partners across Europe, which has reinforced our position as a leading debt provider in the market.”
LaSalle’s European Debt & Special Situations platform also includes the €900m LaSalle Whole Loan Strategies offering whole loans across Western Europe, the €1.5bn LaSalle Residential Finance series offering residential, student housing, hotel and healthcare development lending, and the GBP225m Special Situations Venture which invests alongside sponsors in, among others, preferred equity, joint-venture equity and higher-leverage mezzanine.
Meanwhile, US-owned giant Invesco Real Estate has gained a foothold in European debt investing after buying the real estate financing business of Swiss asset manager GAM. The move now gives the fund manager global lending capabilities, complementing its Asia-Pacific and US debt businesses.
GAM had been looking to reduce its staff and costs, and it was apparently opportune to offload the business with its seven-strong team led by Andrew Gordon over to Invesco, which had been looking for a European bolt-on acquisition for some time. GAM had bought the business in 2015 from Renshaw Bay.
Andy Rofe, Invesco’s managing director for Europe, said “What we wanted to do was have the capability of investing in the real estate debt universe in Europe, which we didn’t have previously... (GAM) is a natural adjunct to the business. We have that full capability of public, private, equity and debt in the US, and wanted to complete that offering to clients in Europe as well.”
All 22 of GAM’s real estate debt investor clients, representing a debt portfolio of about $300m will move over to Invesco, where many of them already have existing relationship with other Invesco businesses.
Rofe said that “dislocation in the market” caused by COVID-19 would lead to a further “pullback from traditional lenders”, accelerating the growth in non-bank debt in Europe since the global financial crisis. “That creates an opportunity for lenders who are best positioned to identify and exploit those funding gaps and be able to provide liquidity to the market.”
Invesco has a strong presence in the European real estate market, with US$ 14.6bn in European direct investments1. In June it held the third close of its European Value-Add Fund II, having raised €550m of its €750m target from 18 European, UK and US investors. Ninety per cent of the investors in Invesco's first value-add fund have committed to EVAF II.
“The dynamics shaping the European debt market are very attractive, and we are keen to fast track our European offering with our new debt team. This gives us highly experienced professionals and asset class momentum from day one, with a view to developing the debt proposition further,” said Rofe.
Also eyeing the European market is London-based alternative asset manager Cheyne Capital, which is thought to be targeting up to €1.5bn for the latest in its series of real estate debt funds. Cheyne is thought to have already raised Stg500m in a first close for series VI and VII of its CRECH suite of funds (Cheyne Real Estate Credit Holdings).
Cheyne targets gaps in the market left by the withdrawal of traditional debt providers. It is currently focused on borrowers requiring finance for value-add, transitional or development projects, mainly in the UK, France and Germany. With debt for these assets currently in short supply, Cheyne believes it can get strong risk-returns from senior lending where it will have first charge over the property, although it is able to lend higher up the capital stack. It has already made loans on its new debt series – two in the UK and one each in France and Spain.
