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for europe’s real estate finance markets awards & annual review 2017 | march 2018

OUT IN FRONT The best performers of 2017

2017 AWARDS The winners revealed

THE YEAR IN REVIEW The crucial stories revisited Doremus Deutsche CRE Conference 270 x 205mm 601DOR0106 Proof 02 05-02-2018

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The year debt became trendy

DANIEL CUNNINGHAM Editor EDITOR Daniel Cunningham Tel: +44 207 167 2033, [email protected]

Reporter Alicia Villegas If there is one clear message to take from ray of sources. With more debt capital to deploy, Tel: +44 207 566 5470, [email protected] 2017, it is that European real estate debt is it is essential that conservative lenders remem- Production Editor well and truly on investors’ radars. ber their risk parameters and those seeking Patrick O'Donnell Tel: +44 207 566 5465, [email protected] During the year, private real estate debt ve- higher returns in less liquid parts of the market hicles with a Europe focus raised in the region back only those sponsors most likely to add val- Design and Production Manager Denise Berjak of $10 billion of capital, more than double the ue to their investments. Tel: +44 207 167 2036, [email protected] amount corralled in the previous year, our data For investors in an increasingly competitive show. space, entrusting capital to experienced man- Marketing Solutions Manager The reason is that many parts of the market agers of debt is paramount. Julius Pike Tel +44 207 566 4286, [email protected] started to look fully priced during 2017. Prop-

Subscriptions Manager erty debt can generate attractive returns – not WINNERS Avinash Mair dissimilar to equity – but with the defensive It is the time of year you’ve all been waiting Tel: +44 207 566 5428, [email protected] quality that loans are cushioned from losses, for, when Real Estate Capital recognises the

Senior Editor, Real Estate should asset values take a dip. In other words, organisations, and the deals, which stood Jonathan Brasse Tel: +44 207 566 4278, [email protected] investors still believe in the European property apart in the preceding year. From p. 3 you story, but are looking for access to the market’s will find the results of our 2017 awards, voted Director, Digital Product Development Amanda Janis returns with an added layer of comfort in this for by our readers. Tel: +44 207566 4270, [email protected] late stage of the cycle. Without giving too much away, here are a Editorial Director Throughout 2017, investors and lenders felt few observations: Senior with large bal- Philip Borel Tel: +44 207566 5434, [email protected] the need to deploy. On a relative-value basis, ance-sheet capability which have steadily pro-

Publishing Director real estate was a more attractive prospect than vided liquidity throughout the cycle have done Paul McLean Tel: +44 20 7566 5456, [email protected] alternatives – including fixed income. The un- well; the activities of the investment banks, derlying property markets generally continued during a year in which sponsors Chief Executive Tim McLoughlin to perform, with occupier demand high and required finance for complicated, time-pres- Tel: +44 20 7566 4276, [email protected] vacancy rates dwindling. Economic growth sured transactions, have also been recognised; Customer services across most European nations and a perceived and the contribution of alternative lenders has Fran Hobson (London) +44 20 7566 5444 An Nguyen () +1 212 645 1919 reduction in political risk with France’s election been rewarded, perhaps most notably in our Natallis Yeung (Hong Kong) +852 21533844 of Emmanuel Macron also helped make the development financing deal category. case for European property. The European real estate lending markets However, lenders remarked throughout the were not without their challenges during 2017, year that sourcing the right deal has become but our awards demonstrate that there are more of a challenge. There is a greater volume plenty of organisations out there keeping debt © PEI MEDIA LTD of equity at play in the sector, limiting the need capital flowing. No statement in this magazine is to be construed as a recommendation to buy or sell securities. Neither this publication nor any part of it may be reproduced or for debt, and investors from outside the region, transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any including from Asia, have relied on banking re- Enjoy discovering who our winners are. information storage or retrieval system, without the prior permission of the publisher. Whilst every effort has been lationships from their home countries in cases. made to ensure its accuracy, the publisher and contributors accept no responsibility for the accuracy of the content in this magazine. Readers should also be aware that external Despite concerns about low yields and the contributors may represent firms that may have an interest in companies and/or their securities mentioned in their prospect of rising interest rates, the appetite for contributions herein. real estate investment displayed in 2017 is likely For subscription information visit to continue throughout 2018. Debt will be www.recapitalnews.com plentiful and will come from an increasing ar-

MARCH 2018 WWW.RECAPITALNEWS.COM 1 Contents

2017 AWARDS AND ANNUAL REVIEW

THE YEAR IN REVIEW 3 18 18 Lessons learned Property debt funds continued capitalising on the strong appeal of debt as an asset class in 2017

20 Q1: Gaining confidence The UK property debt market proved resilient as global investors saw in London a haven 20 despite Brexit 2017 AWARDS WINNERS 3 A full run-down of the firms and 22 Q2: Capital flows deals which won accolades in Property lenders benefited from the Real Estate Capital Awards the wave of Asian investment into 2017 the UK and the continent

17 2017 awards winners at a glance 24 Q3: Financing mega-deals Lenders showed desire to finance large portfolio acquisitions by private equity firms 3 26 Q4: Debt appeal The first CMBS deal in 2017 and 28 new debt fundraising showed investor demand for debt

In Focus

LASALLE INVESTMENT MANAGEMENT IN FOCUS IN REVIEW IN FOCUS: LASALLE INVESTMENT MANAGEMENT ‘The mezzanine opportunity was not a window’ Fresh from raising a third wave of capital for its lending strategy, LaSalle Investment Management debt boss Amy Aznar tells Daniel Cunningham that the market still needs those willing to provide higher

he market for European mez zanine real estate finance has - write the whole loan ourselves, taking the changed considerably in the underwriting risk, and then sell down the seven years since LaSalle Invest senior portion later. The market has become ment Management first raised capital to pro T - more sophisticated and borrowers’ demands vide it, reflects Amy Aznar, the firm’s head - around certainty of execution have changed.” 28 A selection of the market players of debt investments and special situations. In 2010, LaSalle became one of the first THE SWEET SPOT non-bank debt fund managers to offer strips This year, Aznar’s team has raised £600 of debt finance between the 55 and 80 per million of fresh capital, targeting parts of cent loan-to-value parts of the capital stack - the market that remain under-banked. to opportunistic property investors which Alongside a capital-raising for its residential needed higher leverage than the banks could development strategy, LaSalle has brought provide. in £334 million for the third in its series of For lenders, internal rates of return in mezzanine and whole loan funds – LaSalle the order of up to around 14 percent were Real Estate Debt Strategies (LREDS) III achievable, as private equity players generated – which is targeting a final close in Q3 this mid-teens returns from investing in Europe’s year “well in excess”, says Aznar, of its pre- recovering real estate markets. Today, with decessor fund, which closed on £600 mil- returns thinner and a more liquid financing lion in 2013. market, IRRs look more like mid to high single The first LREDS fund generated much of digits. As the market has evolved, so has the its business through financing acquisitions product, Aznar explains. by opportunistic investors such as Benson “We started out lending pure mezzanine Elliot, and Blackstone. and borrowers would come to us to ask for Indeed, LaSalle provided several mezza- a junior tranche. They would then pair us up nine facilities to the latter as it built its with their preferred senior lender,” she says. logistics platform from 2011 and “Over time, that morphed,” Aznar con which it recently sold for €12.25 billion to Real Estate Capital tinues. “We team up with the senior lender interviewed - IN FOCUS: LLOYDS’ LEADERSHIP China Investment Corporation. The second and we approach the borrower together. fund, and now the third, continue to target We blend the margins, or, alternatively, we acquisitions, although there is an increasing volume of business to be had refinancing - “We’ve made it very JULY/AUGUST 2017 WWW.REC clear we want to APITALNEWS.COM Lloyds is viewed by property market partici increase our capacity to 31 pants as having staged an impressive recovery do the larger since the crisis. The bail-out of the bank and underwrites and more the tighter regulatory environment mean that its lending is within stricter parameters than complex transactions” historically, but it is alsoProfile seen to be broadening Madeleine McDougall its lending capabilities. - increased our client base and so we want to- IN FOCUS: LLOYDS’ LEADERSHIP While Richard Dakin, now head of CBRE Capital Advisors, wasBLACKSTONE responsible for delever support our existing clients but also continue aging the bank’s legacy real estate positions, to create new relationships. We lent £8.6 bil the for rebuilding the real estate team lion last year, and although it was down from belongs to Feeney. McDougall played a role in £9 billion in 2015, that was in the context of over 2017 that and is a popular and well-known figure a reduction of investment volumes, so we’ve in London property finance circles. grown our market share,” McDougall says. Not a single deal was pulled after the Brexit “Madeleine cameBorrowing in three years ago and- immediately had an impact in developing vote, Feeney is quick to add: “Of course we our institutional franchise in terms of build adjust pricing in line with market norms, but ing relationships with private equity clients, our commitment is enduring,” he says. Risk, continues McDougall, will be closely interacting withand sovereign wealth funds delivering and traditional money managers, and she brought monitored: “Sixty five percent loan-to-value a great energyGadi and dynamism Jay and to that.Will It Skinnerwas is less of regular Blackstone than two, threetell years ago, but clear to me weDaniel had the Cunninghamperson we needed howwe they are in sourcean uncertain the environment debt and we- PHOTOGRAPHY: MARCUS ROSE inside the team,”behind Feeney the says. firm’s Europeanwant toproperty make sure we deals lend through the cycle. Our average LTV is in the 50s. There is a jux McDougall’s recent deals have included - arranging two loans totalling £409 million taposition inThe the job market of sourcing in that the rental debt fallsvalues, to prin s many US private equity firms (€453 million) for privately owned firm Lazari especiallycipals in the Gadi office Jay and market, Will Skinner. are tailing Jay workedoff, withdraw from the late-cycleand yet alongsidecapital values former continue finance to headgrow; Anil that - Khera, Investments in January,European allowing realit to estate refinance markets, six of its key central London assets. She also can’t- lastwho much left longer.”Blackstone last August after 11 the largest of them all – Black The most recent De Montfort Univer played a key role in the bank’s 2016 financing years to launch his own private rented stone – continues to raise and deploy capital of London’sA O2 arena, with a £185 million sity reportsector highlighted residential UK development banks’ role firm. in the Skin - for its European strategy. ner relocated to London from New York facility, of which 50 percent was subsequently market. Although volumes from that group- fell The New York-headquartered firm is last September. syndicated to Industrial and by 28 percent from the second half of 2016 to- - investing through its opportunistic funds, So, how does Blackstone go about financ of China. the first half of this year, they collectively pro Blackstone Real Estate Partners Europe IV,vided ing more its thandeals? £8 billion to the market in H1. lending. It’s still offices, retail, logistics, alter which closed on €6.5 billion in March 2014, “We’re“We one have of thea track best record capitalised of delivering banks out OVERSEASas well CLIENTS as its fifth European BREP fund, natives. The advantage is that, despite having there,”on saysdeals, McDougall. so lenders “Theknow challenge that when is weabout “Ever morewhich foreign had a recentcapital, close whether on €6.6 it is billion most recently headed institutional clients, I changingpick upthe the market phone perception, to them and looking ask them after Asian insurancein February. money or US private equity, have experience across varied clients sets at - the forexisting terms client it is not base time and wasted,” growing says it. A Jay. key is comingDespite into the tight market, yields so across one of Europe, the Black “There’s usually a deal to be done.” different banks.” strength of the business,” she adds, “is having- Previously managing a team of seven, evolutionsstone at continues Lloyds has to beentarget an properties expansion to which As the equity team identifies a poten - the support to be able to innovate. We had a beyondit acan very apply British its aggressive franchise assetto serving management tial purchase, Jay and Skinner immediately McDougall is now in charge of 65, including - very strong franchise in terms of our balance- front-line bankers and support staff. Her chal clientstechniques. active in the That UK includes but from opportunistic every pur- begin to evaluate the debt component chases of high-quality, well-located proper sheet. I came in to accentuate the larger-ticket lenge is to continue the resurgence of Lloyds’ corner of the world,” comments Feeney. “It’s of the deal. “The financing is part of our ties, as well as core-plus assets for longer hold underwrites and grow the originate-to-dis real estate business, which Feeney set in train an area Madeleine has been particularly underwriting,” explains Skinner. “We work activeperiods. in and “Buywill need it, fix to it, continue sell it,” isto the be, mantra. tributewith the model.” rest of the team from day one to - four years ago when he joined the bank from Dealogic figures show that Lloyds was the Feeney’s closest lieutenants within the business becauseDebt the financemarket is shiftinga crucial and aspect we needof the think through the pricing and structure of Change at the top IN FOCUS: THE RISE OF HENDERSON PARKwhat was then Henderson Global Investors business. During 2016, acquisitions and UK’sthe debt. largest On distribution a large portfolio bank transaction,in 2016, syndi take over his responsibilities. In 2015, Feeney and is now TH Real Estate. In 2013, Lloyds was to keep our franchise moving with it.” - McDougallrefinancings takes were the supported reins at a bytime borrow when catingthat might the equivalent mean arranging of €1.5 multiple billion. loans Madeleine McDougall has takenlater, over McDougall Lloyds’ is in thecommercial top job at one of real the estatesplit the commercialbusiness real from estate unit into six busy offloading the toxic real estate loans that ings of around €5.5 billion, making Black- broken“We’ve down made by it geography very clear or we sector. want toWe increase John Feeney. Daniel CunninghamUK’s talks largest toreal them estate lenders. about the handovercomponent teams, each led by a senior banker had contributed to the bank’s need for a state the UK clearers are perceived by many in the ne of the biggest jobs in UK and focused on an individual client group; -as marketstone to perhaps have become the year’s more largest risk-averse sponsor. due to lookour capacityfor a way to to do optimise the larger the costunderwrites of capital and The promotion happened alongside that bail-out. Feeney’s job was to rebuild a ‘good’ Financing volumes dropped sharply from property finance changed hands well as McDougall’s institutional clients team, the uncertainty following the UK’s Brexit vote. onmore the complexdebt side transactions.to achieve a better At the equity same time, of her predecessor, Feeney, who has become Weber's book, repair the bank’s reputation as a property €13 billion in 2015 – a year during which 29 in August, when Madeleine the set-up included listed clients, major pri But the business is in growth mode, she argues. outcome.” Lloyds’ global head of corporates, a role he took“They are large, institutional assets, some of background lender and generally reboot the business. several mega-deals, including the purchase In some cases, Blackstone will employ a debt McDougall officially became vate groups, developers, international clients “In the last three years we have sensibly WWW.RECAPITALNEWS.COM From left: Gadi Jay and Will Skinner on from the departing Clare Francis. which are throwing off a huge amount of cash “They’ve stuck to what they said they would of GE Capital’s European property assets, broker such as Eastdil Secured, particularly Discussing the transition into the new and private real estate corporates. A protégé of Mark McGoldrick, the head of Lloyds Bank Commercial Banking’sfrom his native US with in flow. That doesn’t sound very opportunistic,”- do,” comments one market player, “taking were financed. The previous year, €7 billion when the advisor has prior experience of a O 2000, he launched a mortgage business and admits Weber.“Now, “We’re I’m buying simply in handling core locations, a wider clientinvestment banker turned private real estate division, assuming the mantle from job, McDougall notes that Feeney remains on bigger tickets, doing full underwrites.” had been borrowed. built a specialon hand situations for advice. unit. “ItFormer helps Goldman that John’s maybe value-addbase,” explainsassets, but McDougall. generating “Theoppor underlyingequity chief known in the press as IN FOCUS: XXX XXX John Feeney, himself promoted within the bank.- ApriL 2017 star bankerstill Markon the McGoldrick same floor, was so a I mentor can pick histunistic returns.”real estate fundamentals are the same across‘Goldfinger’, Nick Weber has held McDougall became a property banker in rEAL ESTATE CApiTAL Profile at the bank.brains,” He reunitedshe says. with “To McGoldrickbe fair,” chimes at in Definitionsclient such types; as it’s core still and investment value-add or developmentprominent roles on Wall Street and in NOVEMBER 2017 22 Parking2003, after working as an investment strat European private equity. the latter’sFeeney, private “you equity haven’t firm reallyMount neededKellett in to”. “get blurred every which way”, Weber argues. egist within the industry. She joined Lloyds2009, where his most notable deal was the sale Henderson Park is targeting net returns to In 1994, Weber joined Goldman AXA INVESTMENT MANAGERS – DATA from pbb Deutsche Pfandbriefbank in 2014 to The appointment of McDougall saw one of NOVEMBER 2017 of hotel chain Jury’s Inn to Lone Star following investors of 14 percent to 16 percent, meaning Sachs in New York. “I came out of REAL ASSETS manage the bank’s growing relationships witha restructuring. gross returns in the order of 18 percent to chemical engineering and ended up capitalan array of institutional clients. Just three yearsHe struck out on his own in July 2016, on Wall Street,” he says. “One of my - 20 percent. “I think that’s a mix of value-add launching Henderson Park, with $500 million and opportunistic. There’s a real blurring of first bosses was Steve Mnuchin, the US - Henderson Park’s Nick treasury secretary.” of backing from US investor Stone Point Cap lines and it’s near impossible in this market PROFILE: AXA IM — REAL Weber is targeting ital, as well as Middle Eastern players Kuwait to distinguish.” Weber began working with McGol 28 REAL ESTATE CAPITAL ASSETS value-add opportunities Investment Authority and Wafra Investment The UK Hilton Metropoles are a case in drick in 1995 in Goldman's New York Advisory Group. By October this year, it was point, he explains. “We bought London and mortgage department. In 2000, he - - - in a late-cycle market. understood to have raised $970 million of Birmingham’s largest hotels, and together they relocated to Europe with the bank to Europe’s wall of debt Profileinvestor capital – with additional co-invest have combined revenues of around £100 mil launch a European mortgage depart maturities is helping to ment bringing its equity to around $1.4 billion. lion (€112 million) and throw off nearly £31 ment, before heading to Hong Kong to Weber does not seek publicity, but meeting run its non-Japan distressed business create them, he tells million in cash, but they need a lot of capex.- It’s DEKaBaNK him in his central London offices, located in a not a core deal, probably not even core-plus, and returning to London to build the Protect the Daniel Cunningham - Georgian rowhouse finds close him to Victoriaeager to Station,discuss but we definitely believe we’ll earn opportun bank’s special situations unit. In May 2009, he rejoined McGol Real Estate Capital istic returns.” - position or Nick Weber, former boss of The two assets, bought for exactly £500 drick, at the latter’s private equity firm, - the current market, his firm’s place in it, and Mount Kellett’s European business how debt will fit into the strategy. million, were sold by private investor Ton Mount Kellett. Weber’s deals included and founder of real estate fund man - state, owned by 84-year-old property mogul leading the purchase and sale of the Timothé Rauly, AXA agement firm Henderson Park, Stickingthe to Jury’s Inn hotels group, with a 90 per WAVE OF MATURITIES Arthur Matyas. The assets were understood to Investment Managers – Fright investment opportunities tend to have Henderson Park’s first deal, in September have £420 million of relatively expensive debt cent-plus IRR and 3.25 times equity Real Assets’ new head of a story behind them. 2016, was the plush Le Méridien Etoile attached to them. Tonstate had initially tried- multiple. funds group, tells Daniel In the 18 months since Henderson Park’s hotel in Paris, bought from Mount Kellett to sell the assets for £700 million. Weber and Mount Kellett was hit by its oil and Cunningham that the- mission - launch, the firm has pursued a value-add and Cedar Capital. Subsequent deals Matyas are understood to have built a rela gas investments and reached a deal maintaining the firm’s loan strategy amid a late-cycle European propDekaBank’s real estate bossinclude Anni a UK Hönicke multi-family tells portfolio, a five- tionship and for weeks had a deal agreed in with Fortress Investment Manage portfolio is his priority erty market. The assets the firm has pickedDaniel Cunningham why thestar AthensGerman hotel bank and two will of the UK’s larg- principle over a handshake. ment to co-manage funds. “I stayed up – including the largest hotels in Pariscontinue and to target large, primeest hotels deals, – the despiteLondon and Birmingham at Mount Kellett through September XA Investment Managers London and a grade A office building Brexit,in Madrid European electionsHilton and DonaldMetropoles. Trump 2015 to monetise the book before – Real Assets is by far the – have a distinctly prime feel to them. But, as leaving. I felt it was the right fiduciary largest of the non-bank lend MATURING DEBT ers which have carved a slice Weber explains, the current market createst is the day after UK prime minister admits. Financial ‘passporting’, he says, is a thing to do. Something like 80 percent ofA the European real estate financing - Theresa May revealed the country’s Calculatedrelatively at the recent end phenomenon,of 2016, Europe and faces lenders five years of huge CRE debt maturities creating of the European real estate was turned market. opportunities for such properties to generate investment opportunities for firms like Henderson Park ‘opportunistic’ returns. Brexit plan and German real estate like140 DekaBank would adapt if those rights into cash before I left.” The investment arm of the French banker Anni Hönicke is visiting were lost. “Don’t forget,” he says, noting giant was the first alterna 35 The year in figures “If you look at our pipeline, 75 percent of 120 After taking some time off to figure London. the bank’s US and Japanese operations, - tive lender to enter European property

ure (€bn) ure out his future, Weber struck out on his

deals come from situations where somethingI t The revelation that the UK will leave “DekaBank100 is a lender in various places debt, back in 2005. After the crisis, when - needs to happen, either motivated by debt own in July 2016, launching Hender

the European single market could under- outsidema o 80 the EU already. So things will be the banks retrenched and institutional t son Park. He remains good friends with maturity, by swaps burning off, orstandably by a tenant spook a foreign banker whose different, but not necessarily new to us. money managers entered, the business 60 McGoldrick, who is “front and centre” that cannot be held much longer,”business he says. is partially built on lending into due t “As a euro-source lender we’ll have to (known as AXA Real Estate until a Sep To buy well, Weber continues,the there UK. needs But if Hönicke, global head of be eb careful40 in the lead up to Brexit as there on his reference list for investors, he tember 2015 rebrand) was already ahead adds: “Mark’s as smart and commercial of the pack. - to be an ‘off-market’ aspect to a realdeal. estate It could at Frankfurt-based DekaBank, could be20 extra volatility in the cross-cur- as they come.” AXA IM – Real Assets is now near

be a bank pushing a property owneris worried, to repay she isn’t showing it. “The big rencyd of ume swap market. Whilst this has the l 0 Netherlands Iberia ing a final close on its 10th commin or refinance its loan, or it couldshock be a wasseller last June with the leave vote,” potentialVo to raise2017 our cost 2018of funds, we 2019 2020 2021 2022 2023 France gled senior property debt fund (CRE - she says. “That was the surprise paradigm still remain confident aboutGermany our relative P eager to seal a swift deal after failing to achieve 25 - H UK Senior 10) which had raised €1.4 billion OTOGR shift, not yesterday’s speech.” competition position.” an open-market sale. “It doesn’t necessarily WWW.RECAPITALNEWS.COM by January and is targeting €1.5 billion, Even before the referendum, Hönicke “Before the Brexit result, the UK was

A mean distressed situations, but most of the with a final close expected this summer.

PH: urce: CBRE Research insists, her view on UK lending was fixed. a perfectSo market for us,” Hönicke adds, The firm invests in the debt markets on J deals we’ve done have involved a motivated AM “We decided that whatever happens we “and now the people have decided not to behalf of AXA insurance companies and E seller,” Weber adds. S be part of the EU, it is just in line with CLARKE will not change our relationship with Weber is well-positioned to source such more than 40 third-party clients from the UK market. It is such a transparent many other big markets.” opportunities. After relocating to London DECEMBER 2017/JANUARY 2018 10 different countries. market, it’s so professional and there is After 10 years of doing business in the Its real estate lending book stands at such a deep investor community. It has so UK, DekaBank has applied for its London €10.5 billion. With infrastructure debt, DECEMBER 2017/JANUARYmany positive 2018 features. All that aside, the outpost to be upgraded from a represent- the platform comprises €14 billion. market needs transactions, and we really ative office to a branch. The paperwork In February, the job of managing believe that there will not be such a big is being processed with German banking the real estate funds, debt and equity, Statistics which tell the story of impact.” regulator BaFin, which also needs to be fell to Timothé Rauly, who joined the Speaking to Real Estate Capital with approved by the UK’s company in 2006 from French REIT 24 REAL ESTATE CAPITAL Hönicke is Mark Titcomb, head of Deka- Authority. Bank’s UK representative office. There will “We’ve done more than 40 transac- be a few extra obstacles for an EU bank tions since we set up here and we have WWW.RECAPITALNEWS.COM lending into post-Brexit Britain, Titcomb been arranger or co-arranger on each,” 29

26 rEaL ESTaTE caPITaL March 2017 the 2017 European real estate DekaBank’s anni hönicke and Mark Titcomb finance sector

2 REAL ESTATE CAPITAL MARCH 2018 t long last, the winners of the In an indication of the fluid nature of A note on the methodology: In the first Real Estate Capital Awards 2017 Europe’s property finance markets, firms instance, companies were invited last can be announced. Our annual that have not previously been in the run- November to make submissions as to why awards, now in their fourth year, ning have scooped certain categories. The they should be up for consideration. These Arecognise those organisations and deals that debt advisor award, for example, has been submissions were taken into account as our stood out from the crowd in European real won by one of the market’s busier bou- editorial team determined who ought to estate finance during the year. tique firms, perhaps demonstrating the make the cut. Without giving too much away before increased emphasis sponsors are placing After a good deal of debate at REC HQ you have had a chance to delve into the on intermediaries in deals across the and discussions with market contacts, following pages, the year’s biggest winners spectrum. shortlists of four were put together. Then, include US private equity firm Blackstone In total, 17 awards were up for grabs, in December 2017, we put the awards to – which proved to be a defining player in recognising lenders across the banking the vote, which closed in early January. the 2017 market – picking up gongs across and alternative segments of the market, The Real Estate Capital Awards are not four categories. Prolific Dutch bank ING, borrowers from the fund management decided by judges, but by you, the readers. which has had a solid run in previous years’ and listed markets, investment and devel- A big thank-you to all who took the time to awards, has also emerged victorious in one opment finance deals and the buyers and vote. We hope you enjoy reading through of our key categories. sellers of loan portfolios, among others. the results.

MARCH 2018 WWW.RECAPITALNEWS.COM 3 ANALYSISAWARDS: 2017

Bank lender of the year

WINNER: During 2017, ING’s real estate from €11 billion of new lending in ING Real Estate financing business lent in scale across 2016. ING’s loan book stood at €28.6 several European markets, taking billion at the end of 2017. “We were Finance leading roles in some of the year’s fortunate to have so many of our cli- largest bank financings. ents active in the market and the result Within lending clubs, the Dutch is a top-quality loan book with the best RUNNER UP: bank participated in the £644 mil- sponsorship,” Shields says. lion (€725.6 million) loan to fund the Real estate lenders operating in purchase of London’s ‘Cheesegrater’ Europe saw challenging market condi- skyscraper in June; the €625 million tions last year. Shields, nonetheless, notes financing in November of Berlin’s ING’s European teams “have all partici- Center; and the €900 million Decem- pated in the [bank’s] overall growth over ber financing of Paris’s Coeur Défense the past three to four years.” office building. Adding: “2017 was a very strong

Financing: Coeur Défense The latter two deals “reflect a year for our European business overall change in investor focus to mainland and we saw particularly strong growth

Europe and show the strength of in Germany, which benefited from our CREDIT: OLIVIER PASSALACQUA “WE WERE FORTUNATE TO HAVE SO our local real estate knowledge”, says €130 billion deposit business with MANY OF OUR CLIENTS ACTIVE IN THE Michael Shields, head of real estate ING-DIBA.” MARKET” finance in Western Europe, the US, The bank is targeting growth in the MICHAEL SHIELDS, ING REAL ESTATE FINANCE the UK and Asia-Pacific. German market, while it is also aiming In 2017, ING wrote €6.8 billion in to increase its lending outside Europe, new loans across Europe, albeit down in the US and Australian markets.

Insurance company lender of the year

German insurer Allianz Real Estate was provided a €300 million loan to finance WINNER: a prolific pan-European real estate ‘Window’, a prime office building in “THE REAL ESTATE lender in 2017. Amid its continued Paris. Since 2013, the insurer has lent Allianz Real LOAN BOOK … IS expansion, deals were closed across in more than 10 European countries. Estate NOW TRULY Europe in the UK, Ireland, Spain, Italy, In 2017, Allianz continued its drive PAN-EUROPEAN” Austria, the Czech Republic and the into the UK market, reaching around Roland Fuchs, Allianz Netherlands – in addition to Germany £450 million of debt exposure. The RUNNER UP: and France, its core markets. insurer also co-wrote a €300 million Aviva Investors Large loans, including €290 million debt facility to fund Amundi’s acqui- to finance BVK’s Liffey Valley mall near sition of Amsterdam’s Atrium office Dublin and £212 million (€239 mil- complex, in a deal dubbed as the larg- lion) for London & Regional’s 55 Baker est single-asset financing in the Dutch Street in London, contributed to the office market last year. In addition, Alli- insurer meeting its target for European anz diversified its loan book – under- new lending for 2017, with a volume writing almost two-thirds of a €160 of €2.2 billion. million loan for a portfolio of logistics “The real estate loan book of Allianz assets across the Czech Republic. in Europe is now truly pan-European Fuchs notes 2018 started with and exceeds €6.3 billion,” says Roland “new and attractive finance opportuni- Fuchs, head of European debt. ties”, as Allianz will continue to further Allianz started lending in Germany grow and diversify its pan-European Fuchs: Allianz’s European loan book ‘exceeds €6.3bn’ in 2011, then France, where it last year debt portfolio.

4 REAL ESTATE CAPITAL MARCH 2018 Blackstone is honoured to be recognised by RE Capital with these 2017 Awards:

Borrower Finance Loan Portfolio Buyer Financing Deal Of High-Yield Debt Fund Team Of The Year – Of The Year The Year – Investment Lender Of The Year Fund Manager

@blackstone @Blackstone @blackstone @ blackstone.com

Real Estate Capital selected award winners by researching real estate news sources to compile a list of finalists, vetting those finalists and soliciting votes from readers. Real Estate Capital and its readers use their own methodologies and criteria. Blackstone does not know the makeup of voters or whether such voters included any investor in a Blackstone fund. A different set of voters may have achieved different results. An award is not representative of any particular investor’s experience. There is no guarantee that similar awards will be obtained by Blackstone with respect to existing or future funds or transactions. This information is provided solely for informational purposes and should not be relied upon as any indication of future performance of Blackstone or any of its funds or portfolio companies.

Real Estate Capital Awards_v9.indd 1 2/20/2018 12:26:21 PM AWARDS: 2017

Senior debt fund lender of the year

WINNER: Last year, DRC Capital invested and Berlin for the entire loan term, with DRC Capital committed to more than £250 mil- the debt provided at a conservative lion (€281.5 million) of new loans leverage point combined with an through its senior lending pro- attractive amortisation profile,” Lat- RUNNER UP: gramme, consisting of three tanzio explains. AXA Investment Europe-focused debt funds. Lattanzio expects DRC’s senior With fundraising for senior strat- offering will continue to benefit Management – Real egies attracting around £750 million from the market opportunity pre- Assets of capital in 2017, managing partner sented by the banking sector’s need Dale Lattanzio notes fundraising for to de-lever due to ongoing regula-

Lattanzio: fundraising to increase 2018 is projected to increase up to tory reform, which is seeing alter- £1.5 billion for the strategy. native lenders playing a larger role “OUR SENIOR Senior deals done last year in the senior funding of commercial DEBT OFFERING included a £42 million loan, with a real estate activity. IS WELL-PLACED development element, in April to “We therefore feel that our senior TO TAKE Evans Randall for an office and retail debt offering is well-placed to take ADVANTAGE scheme in London’s Midtown. Last advantage of the ongoing market OF ONGOING year it also provided a €30 million conditions,” Lattanzio argues. post-development loan to an undis- The size of DRC’s senior loan MARKET closed property manager to finance book stood at around £450 million CONDITIONS” a multi-family residential scheme in by the end of 2017 and the firm DALE LATTANZIO, Berlin. expects it to grow to more than £1 DRC CAPITAL “The scheme is let to the City of billion by year end.

High-yield debt fund lender of the year

Michael Zerda, head of Europe for financing and our first deals in purchase of £11.8 billion (€13.5 bil- WINNER: Blackstone Real Estate Debt Strat- Belgium and Finland.” lion) of buy-to-let mortgages from Blackstone egies (BREDS) describes 2017 as Other areas of expansion UKAR in March. In June, it issued Real Estate “transformative for the business”. included loan-on-loan financing, £323 million of construction debt “We provide high-yielding debt corporate financings, regulatory to Consolidated Developments for Debt products including mezzanine and capital release transactions with St Giles Circus, a mixed-use devel- Strategies whole loans, but we expanded into banks and the purchase of per- opment in the West End of London. new areas of business during the forming credit. In total, the firm Development finance is an year,” explains Zerda. “We did invested €2 billion across 13 trans- attractive prospect, Zerda says: “In RUNNER UP: our first ground-up development actions in Europe, up substantially no other sector have we seen such a M&G Investments loan, our first co-working office from 2016 during which around pronounced pricing shift as in UK €200 million was written in what construction; from low 300s basis Zerda describes as a “transitional points two years ago to more than year” for the business. 500bps today, due to the pull-back Deals in 2017 included mezza- from traditional lenders.” nine participations including €230 BREDS lends from several million in the financing of Office- pockets of capital, including its First and a €188 million participa- $4bn-plus global BREDS III fund, tion in the financing of the Finn- its BMXT US mortgage REIT, a ish Sponda platform, both for its mezzanine fund called BREDS parent company. BREDS also played High Grade and a series of illiquids St Giles Circus: BREDS issued £323m of construction debt a minority role in Blackstone’s based in the US.

6 REAL ESTATE CAPITAL MARCH 2018 ALLIANZ REAL ESTATE INSURANCE COMPANY LENDER OF THE YEAR 2017 AWARD

We are honored to have been recognized for our value creation capability in receiving the “Insurance Company Lender Of The Year 2017 Award”. We would like to thank the readers of Real Estate Capital who voted for us, our international team of experts for their hard work, our investor partners for their strong co-operation and our advisers for their support.

Allianz Real Estate is one of the largest real estate investors worldwide. We develop and execute tailored investment strategies for the Allianz Group, focusing on direct and indirect real estate investments as well as on commercial real estate loans in the 24/7 gateway cities of the world.

Key facts + figures

• €56bn • 17 offices around the world with headquarters in Munich and Paris • 450 real estate professionals

Allianz Real Estate Seidlstraße 24-24a D-80335 Munich, Germany www.allianz-realestate.com AWARDS: 2017

Lender of the year in the UK and Ireland

Lloyds saw a “marked pick-up in the in regional markets across the UK. Last volume of opportunities” in the UK year, for instance, it wrote a £61 mil- last year, despite grim expectations for lion loan for a Birmingham office 2017, a year that many in the market building through the green fund. expected to be slower than 2016, says “Our regional activity, supported by Madeleine McDougall, the bank’s head our growing network of locally based of commercial real estate. relationship teams, helped us to sup- Lloyds’ two cornerstone pro- port some of the most high-profile grammes – its Green Lending Initia- developments and investments outside tive and its with group the capital,” McDougall says. insurer Scottish Widows – under- The collaboration with Scottish pinned an increasing number of the Widows, has also enabled Lloyds’ CRE bank’s transactions last year, McDou- team to arrange longer-term financ- Standing tall: Madeleine McDougall and John Feeney gall notes. ings. The £409 million financing pro- Through its ‘green’ initiative – in vided to Lazari Investments to refi- WINNER: which loans to environmentally sus- nance six of its key central London Lloyds Bank Commercial Banking tainable buildings get a margin dis- assets, combined medium- and long- count – the bank issued around £900 dated funding. The deal included two million (€1 billion) by mid-January loans, a £118 million, 10-year facility RUNNER UP: 2018. The scheme’s most recent provided through Scottish Widows and Morgan Stanley financings in the UK have funded sci- a £291 million, five-year loan provided ence parks, pubs and development. alongside and The bank is also keen to back assets MetLife.

Lender of the year in Germany

Amid a competitive market, pbb segment of the market. In total, WINNER: “THE BIGGEST Deutsche Pfandbriefbank the bank closed just 20 percent of pbb Deutsche CHALLENGE WAS remained a high-volume lender in all transactions it analysed across TO SELECT THE Germany last year – with €3.2 the German market. Pfandbriefbank RIGHT BUSINESS billion of new loans written during Despite the increasing diffi- TO MATCH OUR the first nine months of 2017. culty sourcing deals appropriate The German lender increased to the bank’s lending profile, RUNNER UP: CONSERVATIVE RISK PROFILE” its new lending by 3.2 percent pbb wrote significant financings LBBW during the period, year-on-year, in its home market during the Gerhard Meitinger despite tough conditions in its last quarter of the year. Deals local market. included the financing of the “For pbb, the biggest challenge €112 million KARL development was to select the right business in Munich, plus a €260 million

to match our conservative risk senior loan to finance the acqui- CREDIT: KARL MÜNCHEN GMBH & CO.KG profile,” says Gerhard Meitinger, sition of a portfolio of German head of real estate finance in and Dutch logistics for Growth Germany. Industrial Asset Net-Income The bank noted more trans- Trust. actions coming to the market “I like those deals best where featuring weak assets or loca- we provide a funding solution tions, while there was increasing rather than ‘just’ the funding,” Done deal: pbb financed the €112m KARL development in Munich pressure on margins in the core Meitinger comments.

8 REAL ESTATE CAPITAL MARCH 2018 AWARDS: 2017

Lender of the year in France

An active lender in its home country, Europe, who declined to disclose lend- WINNER: BNP Paribas’s deals included partici- ing volumes. BNP Paribas pating in the bank club that provided BNP increased its market share in a €900 million loan for the purchase France, despite challenging conditions of the Coeur Défense office building in the local commercial real estate RUNNER UP: in Paris by a trio of investors, in France’s market, Polet explains. “This was Société Générale largest single commercial property admittedly due to a scarcity of valuable transaction last year. assets, resulting in less market invest- In 2017, in another , the ment activity.” French bank also provided a €480 mil- Meanwhile, more development lion loan to Canadian real estate firm projects – including new construc- Polet: growth in new loans Ivanhoé Cambridge to finance ’s tion, renovation and refurbishment headquarters in Paris. Also in the – with a different level of risk from French capital, the bank co-wrote a traditional cash-generating assets “WHILE COMPETITION WAS AS FIERCE €250 million debt facility for a Euro- were seen in the French market last AS EVER, WE CONTINUED TO BUILD pean data centre portfolio owned by year, Polet notes. real estate investor . “While competition was as fierce as OUT OUR ON-THE-GROUND BNP Paribas last year recorded ever, we continued to build out our CAPABILITIES” double-digit percentage growth in new on-the-ground capabilities in France GILLES POLET, BNP PARIBAS loans across Europe, with France being and elsewhere in Europe,” Polet says, in line with this figure, says Gilles Polet, noting the bank has also teams based the bank’s head of real estate finance in the UK, Italy, Spain and Germany. AWARDS: 2017

Lender of the year in Southern Europe

Deutsche Bank has been an active financing of a Spanish retail portfo- to go, but not as high a risk point as WINNER: player in Southern Europe’s real estate lio, plus a circa 65 percent loan to debt funds tend to go.” Deutsche Bank debt markets for several years. Spain finance Henderson Park’s €52 mil- Loan pricing in Spain, Kogan adds, was a particular focus during 2017. lion debut in Spain with the acqui- has tightened “considerably” for core Loans closed during the year sition of Los Cubos – one of assets. “For the right sponsor and RUNNER UP: Société Générale included a €100 million acquisition Madrid’s most recognisable office the right assets, we can be more buildings. The Los Cubos deal, aggressive than local banks and that “WE TEND TO SEE which included a capex facility, will is where we find the opportunities.” OUR BORROWERS fund Henderson Park’s reposition- In Italy, Deutsche Bank teamed ing of the building, which was up with debt fund manager Tyndaris BEING MORE vacant when purchased in October. for an €80m financing of the five- CAUTIOUS ON “We tend to see our borrowers star Borgo Egnazia resort in Puglia. LEVERAGE AND being more cautious on leverage Achieved through a private securiti- MAXIMISING and maximising senior debt to sation, Deutsche Bank provided €60 SENIOR DEBT TO avoid the need to pay mezzanine million of senior debt and Tyndaris AVOID THE NEED pricing,” explains Roman Kogan, provided mezzanine debt. TO PAY head of Deutsche Bank’s European In the loan sales market, the bank MEZZANINE commercial real estate group. “We bought the Project Inés non-per- PRICING” have found we can provide optimal forming loan book from Sareb, Roman Kogan, solutions for our clients and ourselves Spain’s ‘bad bank’, in October, by targeting a leverage point that is through the team’s special situa- Madrid icon: Los Cubos Deutsche Bank above where local banks are willing tions group.

Syndication team of the year

WINNER: billion senior financing of Black- able to distribute significantly,” Goldman Sachs stone’s OfficeFirst German plat- says Bora, adding that the market form. “Investors from many dif- for syndicated European real ferent countries across Europe, estate debt remains strong: “There North America and Asia, including is a lot of liquidity from a wide RUNNER UP: banks, insurers and debt funds variety of sources.” ING Real Estate joined us in that deal,” comments The lack of CMBS paper in the Finance Andrea Bora, executive director market fuelled investor demand in Goldman Sachs’ Real Estate for syndicated loans, although Finance business, who co-heads Bora notes that improved pricing the team and focuses on its dis- in the CMBS market is likely to tribution activities. mean 2018’s distribution business

Bora: strong syndication market Across the European markets, is more evenly spread between “OUR LENDING syndication business dipped syndication and securitisation. VOLUMES During a year in which it wrote during 2017 as commercial banks “We underwrite to the best INCREASED more than €3 billion of European countered increasing loan repay- exit and, last year, CMBS was not BECAUSE WE real estate debt, investment bank ments by holding larger volumes competitive. It couldn’t keep up WERE ABLE TO Goldman Sachs supported its of loans to bolster their balance with syndication. Now, it is pos- DISTRIBUTE activities through the distribution sheets. Goldman Sachs, however, sible to price loans for CMBS,” SIGNIFICANTLY” of around €2 billion of paper continued to operate its origi- Bora says. “CMBS works in a ANDREA BORA, through the syndication market. nate-to-distribute model through- number of jurisdictions. That GOLDMAN SACHS Among the loans it distributed out the year. “Our lending vol- market is very receptive to the was its half-portion of the €1.7 umes increased because we were right deal.”

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Financing deal of the year – investment

WINNER: Goldman Sachs on a 50/50 basis – a lot of structural complexity in that Bank of America Lynch/Goldman plus one of the year’s largest Euro- loan which would have been difficult Sachs/Blackstone Real Estate Debt pean mezzanine loans. to underwrite in a larger club deal Strategies for OfficeFirst Goldman Sachs provided half of on day one,” says Janssen. the €500 million junior loan through One challenge involved taking into RUNNER UP: the Real Estate Principal Investment consideration that a key asset from Citi/Morgan Stanley// Area of its . The the portfolio – The Squaire office property debt fund business of the building at Frankfurt airport – was Goldman Sachs Real Estate Principal Investment deal’s sponsor – Blackstone Real to remain within an existing CMBS Area/Blackstone Real Estate Debt Strategies for Estate Debt Strategies – came in to financing structure. Despite the com- Sponda take the other half of the mezzanine plexity and speed required, Janssen piece. says, the lenders priced a deal which Last March, Blackstone closed the “Who would have thought a was competitive with the commercial circa €3.3 billion purchase of Office- German deal with the market’s larg- banking market. First Immobilien – the former IVG’s est borrower would end up being “The terms we could offer were German office portfolio – in one of done by investment banks?” com- attractive,” he says. “The majority of the largest European platform trans- ments Jan Janssen from Goldman deals we underwrote last year were actions of the year. Sachs’ investment bank. priced inside 200 basis points – we The €2.1 billion financing of the The reason, Janssen suggests, is have the ability to go very tight.” deal – which was completed during that the speed of execution required, Syndication of the loan is under- Q2 2017 – comprised a €1.7 billion plus the complex nature of the trans- stood to have brought banks including senior facility, provided by Bank of action, put the financing into invest- Royal Bank of Canada and Helaba Potfolio asset: The Squaire America Merrill Lynch and ment banking territory. “There was into the deal.

Financing deal of the year – development

Cain International, which was founded as Cain Hoy The firm teamed up with Qatar Investment – alongside Brookfield Property Partners – of Canary in 2014, invests in real estate through both equity Authority to provide Canary Wharf Group with Wharf Group as of April 2015. and debt. In one of its stand-out deals of 2017 – financing for One & Five Bank Street, which is 40 “As an ex-banker of 25 years, you get to know indeed, one of the largest development financings percent let to the French banking group Société and build relationships with people in the industry,” in the UK market during the year – it arranged a Générale. comments John Cole, managing principal of Cain £450 million (€508 million) construction loan for Cain International provided 75 percent of the International, “and the opportunity to look at this a 27-storey office tower in London’s Canary Wharf. loan, with the remainder put up by QIA, the owner mandate came about purely from a conversation.” In previous cycles, senior development debt for a prime London office building would have been almost WINNER: certainly provided by a bank. “There is a gap where Cain International, the usual sources of development funding find it chal- Qatar Investment lenging to lend in that space due to capital constraints. We have the ability to offer a one-stop solution.” Authority for One Backing a large London office scheme as Brexit & Five Bank Street, unfolds makes sense, argues Cole: “Yes, there is spec- London ulative space, but we support the sponsors’ business plan and have taken a balanced view on the risk profile. Real estate is about more than examining RUNNER UP: spreadsheets; schemes are driven by people and the Blackstone Real Estate properties themselves and we have faith in the spon- Debt Strategies for St sors’ ability. London is a global city in which people Giles Circus, London Towering deal: One & Five Bank Street want to live and work.”

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Borrower finance team of the year – fund manager

Blackstone – the largest borrower of debt to support the acquisition of to weather economic shocks.” Pric- active in Europe – raised a record the Finnish Sponda platform. ing across markets tightened during WINNER: amount of debt in 2017 to support “Sponda was an interesting deal,” 2017, Skinner and Jay note. This was, Blackstone its investment drive. During the year, recalls Jay. “Raising such a debt quan- in part, influenced by the rare CMBS €18 billion was raised across 40 deals, tum in Finland took a lot of thought. deal which Bank of America Merrill up sharply from €5.5 billion in 2016 We agreed to three separate loans, Lynch issued in November, sponsored RUNNER UP: and €13 billion in 2015. two backing core pools of assets and by Blackstone to fund a portfolio of TH Real Estate Major platform and portfolio pur- a third for a pool of higher-yielding UK ‘last mile’ logistics assets. The AAA chases fuelled the properties.” notes priced at 85 basis points, bring- need for large financ- Across 2017’s deals, Blackstone ing price discovery into a market that ing deals, which are sought loan agreements which had been moribund. arranged for the provided the freedom to execute “It was an important transaction,” firm by Will Skin- opportunistic and value-add strat- says Skinner, “it showed that there is ner and Gadi Jay in egies across its investment. investor appetite for CMBS in Europe the real estate team. Skinner explains: “We continued as a viable alternative source of capital.” Financings included to work with debt capital partners The firm will continue to target more than €2 bil- to structure deals that align the cap- large-ticket investments in 2018, lion for the acquisi- ital stack. Our typical deal includes a bringing scope for major financing tion of OfficeFirst, cash trap based on performance but deals, Jay says. “We will also consider the former IVG’s no default covenants. This structure our existing facilities with a view German offices plat- protects the lender while also ensur- to refinancing. It can be efficient to Dealmakers: Gadi Jay, left, and Will Skinner form and €2.6 billion ing that deals have sufficient liquidity aggregate loans into single facilities.”

Borrower finance team of the year – REIT

Hammerson agreed a £350 mil- £400 million US private place- lion revolving credit facility with ment, a €500 million bond issue a syndicate of 14 international and a £420 million revolving banks – including several Asian credit facility. lenders – designed to reduce its Another of 2017’s notable debt cost of debt. deals was the €625 million refi- The deal, priced at 90 basis nancing of the Dundrum Town points, replaced a £175 million Centre mall in Dublin, alongside Shop shape: refinanced the Dundrum mall in Dublin loan, which carried pricing of joint owner Allianz Real Estate. 150bps. The run-down of lenders The deal locked in a sub-2 percent UK retail REIT Hammerson ended in the deal included Japanese bank margin for seven years, with the 2017 with the announcement that MUFG, First Commercial Bank, loan provided by a club of banks it had agreed a £3.4 billion (€3.8 ICBC, Agricultural Bank of China led by BNP Paribas and DekaBank. WINNER: billion) all-share offer for rival shop- and Bank of Taiwan. The refinancing came almost Hammerson ping centre owner Properties “This new credit facility is the two years after Hammerson and in a deal that will create a £21 bil- latest milestone in our journey to Allianz made moves towards lion pan-European shopping giant. reduce Hammerson’s cost of debt ownership of Dundrum by RUNNER UP: During the year, Hammerson’s by refinancing in an attractive acquiring the ‘Project Jewel’ loan Unibail-Rodamco finance team, led by chief finan- funding environment,” Drake- book from Ireland’s National cial officer Timon Drakesmith, smith said at the time. Asset Management Agency, which worked to get the firm’s debt The deal followed a series of contained legacy debt secured by facilities in order. In April, 2016 financing deals, including a the property.

14 REAL ESTATE CAPITAL MARCH 2018 AWARDS: 2017

Debt advisor of the year

While BBS Capital may operate companies, although it does have on a smaller scale than the mar- institutional clients. WINNER: ket’s largest real estate debt advi- “Our typical client uses us BBS Capital sory shops, it was prolific during as an extension of their finance 2017. In total, the London-based team. We co-ordinate with their firm arranged £650 million (€734 in-house team and external pro- RUNNER UP: million) across 44 transactions fessionals to ensure a seemless Eastdil Secured with a total property value of process,” says Buchler. around £1.1 billion. Most of its business is in the The boutique firm has been UK market, although 2017 also active for around 15 years. “I’ve saw deals in Germany and Spain. never seen a market that is this In total, it sourced debt from 15 advisory-friendly,” says the firm’s lenders, ranging from UK clear- co-founder Adam Buchler. ers to niche non-bank players, of “The UK market is becoming which six were new to the firm. Buchler: need for intermediaries “THE UK increasingly advisor-led, gradually Deals ranged from investment MARKET IS following the US model. There is deals on prime property to sub- BECOMING a greater need for investors to who can deliver what terms in two-year bridge financings. INCREASINGLY use intermediaries to help navi- which timeframe to optimise the “We saw a marked increase in gate a market with an increasing client’s positions.” the volume of short-term loans ADVISOR-LED” number of lenders with different The BBS client base is weighted that we arranged, reflecting ADAM BUCHLER specialities. towards private clients includ- market conditions where speed “A quality advisor will know ing family offices and property of performance is paramount.”

Loan servicer of the year

business for Mount Street to €35 WINNER: billion. Excluding the purchase, the Mount Street firm posted growth of €12.8 billion, which compares with €4.3 billion in 2016. RUNNER UP: “I certainly believe that 2017 was CBRE Loan Services a pivotal year for Mount Street as we continued to expand our market share and improve our service levels, the growth of nearly €13 billion

Lloyd: Mount Street continued to expand market share confirms this,” Lloyd says. Last year’s outstanding deal was London-based Mount Street had a Founding partners, Ravi Joseph the full repayment of the Orazio year of change in 2017. Germany’s and Paul Lloyd also completed the Italian CMBS loan, Lloyd explains. Aareal Bank bought a 20 percent management of the firm’s Initially, the non-performing loan, “2017 WAS A stake in the business; it acquired the seed investor, US private equity real with an original size of €185 million, PIVOTAL YEAR portfolio management company of estate firm Greenfield Partners, did not receive acceptable bids. FOR MOUNT defunct German bank WestLB’s which provided the principal capi- Exploiting a restructuring route, STREET” legacy loan book and with it a €29 tal for Mount Street at its launch in Mount Street did the first successful PAUL LLOYD billion workout mandate; and it 2013. full-redemption workout of an Ital- expanded into the Netherlands, The acquisition of the €29 billion ian loan in a CMBS deal, securing Greece, Ireland, Spain and the US. mandate brought last year’s new the full repayment of the senior loan.

MARCH 2018 WWW.RECAPITALNEWS.COM 15 ANALYSISAWARDS: 2017

Loan portfolio seller of the year Spain’s largest lender, Santander, Santander kept 49 percent of pulled off one of the most inter- the joint venture, in a move that WINNER: €30bn esting loan portfolio transactions has positioned it to take advantage in Europe last year. The bank of the clean-up of the distressed Santander of non-core real estate bought struggling Banco Popular property portfolio, amid growing assets transferred to the for a nominal €1 and subse- momentum in the domestic real Santander/Blackstone JV RUNNER UP: quently formed a joint venture estate market on the back of Spain’s vehicle UK Asset with US fund giant Blackstone economic recovery. Resolution to take ownership of the €30 Announcing the deal, Rodrigo billion property book, retaining Echenique, chairman of Santander, an interest in the upside. noted the interest generated in the For a price understood to be transaction among international about €5 billion, Santander sold to investors was “a clear sign of confi- Blackstone a 51 percent stake in the dence” in the Spanish economy. portfolio transferred from Banco By moving the book off its balance Popular. The portfolio consisted of sheet, Santander also had a 12 basis bank-owned properties with an orig- points boost to its core capital ratio. inal value of around €18 billion – as The deal allows the bank to capitalise well as non-performing loans carry- on Blackstone’s know-how in manag- ing a €12 billion face value. The sale, ing real estate to grow the portfolio’s agreed in August last year, was valued value, comprising €12.6 billion in

Profit trail: the Spanish bank bought Banco Popular for a nominal €1 at €10 billion – a steep discount to land, €8 billion in residential prop- the €30 billion gross book value. erty and €2.1 billion in retail assets.

Loan portfolio buyer of the year

WINNER: Popular. For a price of about €5 Blackstone billion, the fund giant bought a 51 percent stake in a portfolio com- prised of real estate assets worth around €18 billion and non-per- RUNNER UP: forming loans of €12 billion. The Cerberus Capital real estate assets of the portfolio Management were written down to approxi- Bet on the house: Blackstone bought a mortgage book from UKAR mately €10 billion. “This significant investment Blackstone closed two major Bradford & Bingley, was as one of reflects our continued confidence £11.8bn loan portfolios purchases in the largest government asset sales in the robust recovery of the Amount Blackstone 2017. in Europe during the year. Spanish economy,” Jon Gray, global and Prudential paid In April, the US private equity UKAR said at the time the head of real estate at Blackstone, for Project Ripon firm bought, along with UK price of the deal was at the “upper said when the deal was announced. from UKAR insurer Prudential, an £11.8 bil- end of expectations”. The book The private equity firm won an lion (€13.3 billion) performing value of the loans was £12.2 bil- auction process in which Apollo €30bn mortgage book from UK Asset lion, with most of its borrowers and Lone Star were also compet- The size of Banco Resolution (UKAR), the govern- on an interest rate of 2 percent. ing. Blackstone submitted “the Popular’s real estate ment-mandated ‘bad bank’. In August, Blackstone closed best offer in terms of both its book, which Blackstone The deal, mostly involving per- the €30 billion joint venture with value and management plan”, has taken on forming buy-to-let local mortgages Spanish bank Santander to take Santander said in a statement at from former UK building society on the real estate book of Banco the time.

16 REAL ESTATE CAPITAL MARCH 2018 ANALYSIS

2017 award winners at a glance

Award title Winner Runner up

Bank Lender of the Year ING Real Estate Finance Morgan Stanley

Insurance Company Lender of the Year Allianz Real Estate Aviva Investors

Senior Debt Fund Lender of the Year DRC Capital AXA Investment Management – Real Assets

High-Yield Debt Fund Lender of the Year Blackstone Real Estate Debt Strategies M&G Investments

Lender of the Year in the UK and Ireland Lloyds Bank Commercial Banking Morgan Stanley

Lender of the Year in Germany pbb Deutsche Pfandbriefbank LBBW

Lender of the Year in France BNP Paribas Societe Generale

Lender of the Year in Southern Europe Deutsche Bank Societe Generale

Syndication Team of the Year Goldman Sachs ING Real Estate Finance

Sponda (Citi, Morgan Stanley, Goldman Sachs OfficeFirst (Bank of America Merrill Lynch, Real Estate Principal Investment Area, Royal Financing Deal of the Year - Investment Goldman Sachs, Blackstone Real Estate Debt Bank of Canada, Blackstone Real Estate Debt Strategies) Strategies)

One & Five Bank Street, London (Cain St Giles Circus (Blackstone Real Estate Debt Financing Deal of the Year - Development International, Qatar Investment Authority) Strategies)

Borrower Finance Team of the Year - Fund Blackstone TH Real Estate Manager

Borrower Finance Team of the Year - REIT Hammerson Unibail-Rodamco

Debt Advisor of the Year BBS Capital Eastdil Secured

Loan Servicer of the Year Mount Street CBRE Loan Services

Loan Portfolio Seller of the Year Santander UK Asset Resolution

Loan Portfolio Buyer of the Year Blackstone Cerberus Capital Management

MARCH 2018 WWW.RECAPITALNEWS.COM 17 FEATURE: OVERVIEW OF 2017 Lessons from 2017

Last year, the role of real estate debt in a late-cycle market came under the spotlight, writes Daniel Cunningham

n some ways, 2017 was the calm af- Real Estate closed on more than £1 billion the first time. It comes as property compa- ter 2016’s storm. European real es- in April for its sixth and largest European nies are said to be increasingly writing debt tate finance markets were shaken by debt fund. “We saw a fundamental increase to each other. Traditional real estate equity political events during 2016, which in commitments from institutional inves- investors in Europe are hedging their bets Iimpacted investment activity and forced a tors’ real estate, private credit and alter- by adding debt to their capabilities. reassessment of lenders’ risk appetites. native fixed income allocations, due to the Speaking to Real Estate Capital in De- Last year, many in the market had be- sustainable risk adjusted returns offered by cember, Brookfield managing partner An- come used to uncertainty. It was a year this asset class,” Andrew Radkiewicz, global drea Balkan, who oversees the Brookfield in which many focused on the strength of head of debt strategies for PGIM Real Es- Real Estate Finance fund series, said: “This the underlying real estate markets across tate, said at the time. will be our initial foray into this market Europe, a continent which experienced The 2017 spike in debt fundraising, from a lending perspective,” adding that strong economic growth. sources say, shows that, in this top-of-the- the firm could deploy its total $600 million It was also a year in which the benefits of market phase of the cycle, investors value allocation in the UK “if the opportunity property debt in a late-cycle market became the defensive qualities of debt, rather than presents itself”. apparent to many investors, despite the investing in prime assets that are widely Balkan explained that investors are in- challenges faced by those tasked with find- considered expensive. creasingly channelling their allocations into ing the right opportunities against which “It’s very much defensive, with an attrac- private debt as an asset class. “We have seen to write loans. The year provided plenty of tive current yield and a more senior posi- really strong interest in mezzanine debt lessons for the market. Here are 10 observa- tion in the capital stack than equity,” said from investors globally as they are attract- tions to consider. one fund manager, responding the Urban ed by a really good risk-adjusted return,” Land Institute and PwC’s Emerging Trends she said. CAPITAL IS MOVING TOWARDS DEBT Europe survey. “We all recognise that we are VEHICLES relatively late in the economic cycle, so if DEALS BECAME (EVEN) HARDER TO There was a spike in European real estate you think there is going to be a downturn SOURCE debt fundraising for private vehicles during somehow, somewhere, sometime in the Real estate investment volumes across Eu- 2017, according to Real Estate Capital data. next few years, it’s a good place to be.” rope increased during 2017, up 9.3 per- During the year $10.1 billion was raised cent to €286 billion, according to CBRE. for Europe-only strategies, overshadowing NEW LENDERS ARE STILL ENTERING However, this did not necessarily translate the $4.15 billion raised during the previous THE SPACE to more business for lenders, as there was year. During 2017, Canadian giant Brookfield more equity at play in the market, as well Among the largest fundraisings, PGIM brought its lending business to Europe for as activity from investors from outside the

18 REAL ESTATE CAPITAL MARCH 2018 FEATURE: OVERVIEW OF 2017

region which brought with them their own Co-living and co-working became the CMBS IS NOT DEAD YET banking relationships. buzz-phrases of the year, with WeWork the It took until November for the first pub- This has also meant fewer pickings for most talked-about occupier. The lending licly sold CMBS of the year to happen syndication bankers. Figures compiled by community has arguably been a little slow in Europe. BAML securitised a loan to Dealogic in February 2018 showed that, to get to grips with technology and change Blackstone secured on a UK portfolio of for the second consecutive year, syndicated in the sector, so the knowhow to under- last-mile logistics. Investors clambered commercial real estate loan volumes in the write less traditional property from a debt for notes, which priced tightly at 85 ba- EMEA region decreased during 2017. The perspective will be important in 2018. sis points at the AAA-rated end. The deal volume of loans written in the syndication At November’s CREFC Europe confer- tested pricing, and while few expect it to market during the year totalled €40.6 bil- ence in London, innovation was discussed. herald a triumphant return of European lion, down 15 percent on the previous year. LendInvest’s chief executive and co-found- CMBS, it did show that such deals remain er Christian Faes told delegates the compa- an option for banks. INTEREST RATES BECAME A TALKING ny is already seeing automation transform POINT mortgage lending. Though “real underwrit- NPL ACTIVITY HAS SHIFTED SOUTH The first rise in interest rates in the UK ers” still make the credit decisions, the fact Regulatory pressure on banks to deal with for a decade, as well as the expectation is the company is on track to lend around problem loans ramped up in 2017, and of further rate rises in the US market in £1 billion per year in the next two years or Spain’s banks were among those to take ac- 2018 put the prospect of an end to the so, and it will do so with fewer than 200 tion. Cerberus bought the bulk of BBVA’s ‘lower for longer’ environment front and employees. property assets, while Blackstone formed centre in lenders’ thoughts. The consensus a JV with Santander to work through the is that rates will remain low for a while INVESTMENT BANKS STILL HAVE BIG real estate book of Banco Popular. Italian yet, but the rises served as a reminder that APPETITES banks used securitisation, in some cases, to low rates cannot be taken for granted. The Some of the year’s most notable deals were offload toxic debt. Bank of England hinted in February 2018 done by private equity firms – often Black- that rates would rise sharper and sooner, stone – and took the form of platform pur- SOME SHOWED IT’S POSSIBLE TO GO while the European Central Bank is wind- chases, such as the Sponda Finnish mixed- GREEN ing back quantitative easing, demonstrat- use platform. When these mega-deals ‘Green’ lending remains small-scale in real ing that monetary policy is changing. did happen, investment banks including estate, but Berlin Hyp issued its second Morgan Stanley, Bank of America Merrill unsecured green Pfandbrief and Lloyds INNOVATION IS HAPPENING, FAST Lynch, Goldman Sachs and Deutsche Bank closed a major with en- A major lesson from 2017 was that un- proved they still have the appetite to fi- vironmental criteria written into it. In derlying real estate markets are changing. nance large tickets in short timeframes. the first loan of its kind, Lloyds arranged a €600 million syndicated financing of French REIT Unibail-Rodamco, with FUNDRAISING FLURRY green lending criteria. Debt raised for Europe-focused property lending strategies spiked in 2017 THE WARNING LIGHT IS 30 60 ON AMBER

25 50 The UK steering group examining post-cri- sis measures to avoid another lending cliff 20 40 presented the market with the metric they

15 30 believe will best help lenders predict an- other crash – adjusted market value. The 10 20

Number of funds findings highlighted that lenders need to

Debt capital raised ($bn) Debt capital raised be ready to pull back once values drift too 5 10 far from the historical norm. According to 0 0 the metric, the market should be on amber 2011 2012 2013 2014 2015 2016 2017 alert – there’s no need to panic, but values Europe Rest of World Number of funds closed are getting toppy. A heightened awareness Source: Real Estate Capital data of risk will be crucial into 2018. n

MARCH 2018 WWW.RECAPITALNEWS.COM 19 CAPITALREVIEW OFWATCH 2017: KEY STORIES Q1|A quietly confident start

Defining deal: Lloyds banks on London

IF 2016 WAS a year in which Brexit insurance firm, Scottish Widows. The uncertainty curtailed lending activity in the second – £291 million over five years – was key UK sector, sentiment was somewhat as a club loan, bringing in Royal Bank of improved by early 2017. UK clearer Lloyds Scotland and MetLife. was among the lenders to state their intent Other UK financings in the first quarter for the year – it arranged a £409 million of 2017 included a £436 million deal (€464 million) financing package for family- underwritten by Morgan Stanley and owned investment firm Lazari Investments, Cheyne Capital to fund Brookfield’s combining medium- and long-dated funding CityPoint tower in London, while Morgan alongside three other lenders. Stanley – alongside Royal Bank of Canada The debt refinanced six central London – also provided a £305 million loan to iQ properties. The first loan, of £118 million, Student Accommodation for a portfolio of

Capital idea: London hosted debt deals was provided in partnership with group UK properties.

POPULAR STORIES €29 billion mandate. Mount Street acquired core debt pile ahead of a sale. The bank the portfolio management of announced that it has agreed the sale of ICG-LONGBOW REVISES SENIOR Erste Abwicklungsanstalt (EAA), the bad legacy assets totalling €1.64 billion, con- DEBT STRATEGY bank which was formed in 2009 to manage tributing to a 1.3 percentage point drop ICG-Longbow outlined its proposals for a the assets of the former WestLB. in its non-performing exposure ratio revised investment strategy for its listed The portfolio transfer and manage- which was most recently reported at 17 UK senior real estate debt fund, which ment contract was the largest of its kind percent in September 2016. “better reflects” current market conditions. completed in Europe and brought the “The sale marks another important ICG-Longbow said that the objective of volume of debt that Mount Street man- milestone on the road to a change of the new strategy is to enable it to access a ages to around €55 billion. ownership,” said Stefan Ermisch, CEO of “significantly wider” CRE debt market op- The €29 billion book contains a mix HSH Nordbank. portunity through exposure to senior and of performing and non-performing whole loans. . BANK CLUB PROVIDES €263M The proposals would allow the firm to FOR XANADU target senior loans up to 85 percent loan- HSH SELLS €540M NPL Three Spanish banks and a French bank to-value (LTV). Up to then, the firm pro- PORTFOLIO provided a €263 million loan to shopping vided finance to a 65 percent LTV. Germany’s HSH Nordbank has sold a real centre investor Intu to fund its purchase of a “The board believes that the revised in- estate loan portfolio with a face value of mall in Madrid, Spain. The five-year loan was vestment policy will enable the company to €540 million to Bank of America Merrill provided by Santander, BBVA, Credit maintain its current dividend policy for the Lynch as part of a wider €1.64 billion sale of Agricole and CaixaBank. The facility is foreseeable future,” commented SSUP its non-performing exposure. secured by the 153,000-square-metre chairman Jack Perry. The commercial real estate portfolio Xanadu shopping centre. sits within HSH’s non-core business and The all-in cost of debt was estimated MOUNT STREET WINS €29BN relates to legacy loans written before to be around 2 percent and the financing MANDATE 2009 secured by properties in Scandina- deal reflected a loan-to-value ratio of Loan servicing firm Mount Street acquired via, the Netherlands and Germany. just below 50 percent. Intu bought the portfolio manager of defunct German HSH, which is subject to a public Xanadu for €530 million from Ivanhoé bank WestLB’s legacy loan book and with it a sales process, is aiming to reduce its non- Cambridge Group. n

20 REAL ESTATE CAPITAL MARCH 2018 REVIEW OF 2017:CAPITAL KEY STORIES WATCH

KEY DEALS

Lender Borrower Loan size (m) Asset(s) Notes Morgan Stanley, Cheyne Brookfield Property £436 CityPoint Tower, City of £335m of senior debt from MS and £101m Capital Management Partners London of mezzanine from Cheyne for the 5-year financing in January Lloyds, Scottish Widows, RBS, Lazari Investments £409 6 Central London properties £118m loan provided by Lloyds and Scottish MetLife Widows for 10 years; £291m 5-year loan from Lloyds, RBS and MetLife Morgan Stanley, RBC Real iQ Student £305 Westbourne UK student 5-year loan to refinance existing debt Estate Capital Partners Accommodation housing portfolio

Societe Generale-led LaFinca, Spanish £395 LaFinca's office portfolio Allianz Real Estate participated in the deal consortium office landlord

DekaBank Hyundai M&F £290 So Ouest Plaza, Paris 5-year loan to fund Korean consortium's Insurance-led €474m office tower acquisition consortium Credit Agricole, Natixis, ING, TIAA and NEINVER £344 5 outlet retail properties in 3 separate loans for a 7-year financing BNP Paribas Madrid, Milan and Poznan, Poland , Intesa SanPaolo, Qatar Investment £900 140,000 sq m Porta Nuova 5-year loan reflecting 50% LTV Banco Popolare Di Milano, Authority business estate, Milan , BNP Paribas Citi, Bank of Ireland Said Holdings £137.50 5 Churchill Place, London 4-year refinancing of 320,000 sq ft building occupied by JPMorgan Markets

Santander, BBVA, Credit Intu Properties € 263 153,000 sq m Xanadu All-in cost of debt around 2% for 50% LTV Agricole, CaixaBank shopping mall, Madrid deal

Blackstone Real Estate Debt Greystar £175 Harbour Central PRS scheme, Scheme is located in London’s Docklands Strategies London

PEOPLE

• AXA Investment Managers – Real Assets • Lloyds Bank Commercial Banking hired named Isabelle Scemama, former head Andrew Wheldon, the former head of of funds – including the company’s debt residential debt and structured finance fund series – as its new CEO, replacing at CBRE, as a director in its listed CRE Pierre Vaquier. Timothé Rauly, formerly clients team in January. Wheldon joined head of the firm’s commercial real estate CBRE in 2014, prior to which he worked and core funds business, took over as for Royal Bank of Scotland from 2009. head of AXA IM – RA’s funds group. He was a professional rugby player for Leeds for four years until joining Capita • Blair Lewis, the former CEO of Hatfield in 2002. Philips International, which was acquired from Starwood by Situs in late 2016, • In February, Cushman & Wakefield hired left the merged company in January. real estate capital markets specialist Lewis said that the integration of the Ritesh Ramchandani from Landmark HPI and Situs real estate debt advisory Partners to join the debt and structured businesses was “well on the road to finance business it established in 2016. being completed” and he had decided Ramchandani previously held banking to take some time with his family before and structured finance roles at Standard pursuing his next opportunities. Chartered Bank and GE Capital. Scemama: AXA promotion

MARCH 2018 WWW.RECAPITALNEWS.COM 21 CAPITALREVIEW OFWATCH 2017: KEY STORIES Q2|Capital flows into Europe

Defining deal: Funding the ‘Cheesegrater’

ONE OF THE year’s largest deals was closed (Hong Kong), HSBC and ING Real Estate in Q2 when Blackstone sourced €2.1 billion Finance provided £644 million of debt. from investment banks for its purchase of the The deal demonstrated that prospective former IVG’s German office platform, lenders to Asian sponsors have an advantage if OfficeFirst. However, the deal which perhaps they have links to the region, or an existing best illustrated the capital flows trend in the relationship with the borrower. Sources said wider European property market was the the deal was very much forged in Hong bank financing in June of the Asian buyer of Kong, with the local branches of each lender London’s Cheesegrater tower. heavily involved, even though the execution Hong Kong-based investor CC Land was reportedly passed to London. Holdings spent £1.15 billion (€1.3 billion) in CC Land Holdings is run by billionaire January to buy the City of London building, Cheung Chung Kiu. The Leadenhall Building officially called the Leadenhall Building. Like was the firm’s second acquisition in London other equity-rich Asian buyers of trophy in three months, following its December assets, the skyscraper was initially a cash 2016 purchase of One Kingdom Place, a purchase, followed by a debt deal arranged 264,000-square-feet office building, from High finance: London’s ‘Cheesegrater’ largely in its domestic market. Bank of China TH Real Estate for £292 million.

POPULAR STORIES billion for its latest European property ing, repositioning or other value-add ini- debt fund. tiatives. UK DEBT MARKET Pramerica Real Estate Capital VI was ‘INCREASINGLY FRAGMENTED’ the sixth and largest of the firm’s funds UKAR SELLS £11.8BN There was a partial recovery in borrower dedicated to European private real estate PORTFOLIO demand for property debt in the UK debt. PGIM said it raised more than 80 UK Asset Resolution, the government- market during the six months to the end of percent of the capital for PRECap VI mandated ‘bad bank’, sold assets of former Q1 2017, although the country’s real estate during the nine months following the UK bank Bradford & Bingley to Blackstone finance sector is “increasingly fragmented”, UK’s vote to leave the European Union. and Prudential for £11.8 billion. The mega- according to Laxfield Capital. Investors in the closed-end discre- purchase was financed by a consortium Sourcing debt for non-core assets re- tionary fund include public and private made up of Barclays, HSBC, Lloyds, mains a challenge due to the compression pension funds, sovereign wealth funds Nationwide, RBS and Santander UK. of risk-averse senior lenders’ capital on and insurance companies from the Amer- The deal saw total loan repayments to core property, the debt advisor and invest- icas, Europe, the Middle East and HM Treasury of £11.8 billion including ment manager’s UK CRE Debt Barometer Asia-Pacific. The fund has an in- £10.9 billion of the £15.65 billion Finan- report showed. come-driven debt strategy and targets cial Services Compensation Scheme The volume of debt requirements dur- double-digit returns. (FSCS) loan. ing Q4 2016 and Q1 2017 increased by 10 The fund will provide whole loans, A statement from the UKAR, the percent, up from the previous six-month mezzanine and preferred equity, target- body set up in 2010 to manage delever- period, which spanned the UK’s EU ref- ing predictable income returns com- aging Bradford & Bingley and Northern erendum. bined with capital upside through profit Rock Asset Management’s portfolio of participation. loans, said the price was at the “upper PGIM REAL ESTATE RAISES It will target loans from £10 million end of expectations”. The book value of £1BN-PLUS to around £100 million in deals which the loans was £12.2 billion and interest PGIM Real Estate raised more than £1 will include development finance fund- at each loan was 2 percent. n

22 REAL ESTATE CAPITAL MARCH 2018 REVIEW OF 2017:CAPITAL KEY STORIES WATCH

KEY DEALS

Lender Borrower Loan size (m) Asset(s) Notes Cain International, Qatar Canary Wharf £450 One & Five Bank Street, Construction loan for a 715,000 sq ft office Investment Authority Group Canary Wharf London scheme. Cain International provided 75%.

Goldman Sachs Pradera € 500 Pan-European retail portfolio Loan finances Pradera's acquisition of the portfolio from retailer IKEA

Lloyds Bank Commercial Unibail-Rodamco € 600 Revolving credit facility 5-year loan priced in relation to 'green' Banking, plus syndication criteria through Lloyds £1bn Green Lending partners Initiative Helaba, CSOB, UniCredit, CPI Property Group € 440 Retail portfolio covering Czech Helaba provided €354m for Czech and Polish Raiffeisenbank, Sberbank, Republic, Poland, Hungary and assets, with CSOB taking 40% of the loan. HypoNoe Bank Romania Oxenwood Real £151 Ultrabox' UK logistics portfolio Loan financed the £286m purchase of the Estate portfolio

Bank of America Merrill Lynch, Blackstone €2,100 OfficeFirst German portfolio Comprised a €1.7bn senior portion, plus Goldman Sachs, Blackstone mezzanine finance Real Estate Debt Strategies Blackstone Real Estate Debt Consolidated £323 St Giles Circus Development financing of the redevelopment Strategies Developments of a West End of London block. Structured as separate senior and mezzanine facilities Goldman Sachs TPG, Patron Capital €337 Merin Dutch office portfolio 5-year loan at 65% LTV secured by 139 properties, to refinance 2015 loan from ING and ABN Amro, priced around 300bps Bank of China (Hong Kong), CC Land £644 The Leadenhall Building - The 55% LTV, 5-year financing priced around HSBC, ING Real Estate Finance Cheesegrater, London 150bps and consisted of equal portions by each bank Bank of America Merrill Lynch, Blackstone and M7 € 1,100 Pan-continental Hansteen Loan financed the €1.28bn purchase of Deutsche Bank, Morgan Real Estate logistics portfolio logistics across Germany, the Netherlands, Stanley France, and Denmark

PEOPLE

• Madeleine McDougall was promoted • Cerberus Capital Management reshuffled to acting head of Lloyds Bank its real estate platform in May, with Commercial Banking’s commercial real head of European real estate Ron estate business after John Feeney, who Rawald promoted to a New York- previously led the unit for four years, based international role and Daniel was promoted to acting head of global Dejanovic moving to Amsterdam to corporates within the bank. McDougall, lead the European team. As part of the previously head of institutional clients, reorganisation, Lee Millstein, Cerberus’s joined Lloyds in 2014 from pbb head of European and Asian distressed/ Deutsche Pfandbriefbank. real estate, ascended to the newly created role of global head of real estate. • Helaba hired Christian Schmid from Aareal Bank in June to take over from • In June, brokerage firm HFF added a Jurgen Fenk as its board member for debt specialist to its recently launched real estate. Schmid’s responsibilities London business with the hiring of include a number of divisions within the Edward Daubeney from Cushman & firm including real estate lending, debt Wakefield. Daubeney reports to debt capital markets, sales management real specialist Michael Kavanau, co-head of estate and real estate management. the London office. Schmid: Moved to Helaba

MARCH 2018 WWW.RECAPITALNEWS.COM 23 CAPITALREVIEW OFWATCH 2017: KEY STORIES Q3|Private equity spends big

Defining deal: Finnish mega-financing

During Q3, Blackstone closed in on a €2.6 The deal highlighted the investment billion financing of its recently acquired banks’ eagerness to finance private equity Sponda platform in Finland, in one of the firms’ platform purchases. Blackstone was cycle’s largest real estate lending deals. a defining player in European real estate US investment banks Citi and Morgan in 2017, swooping for major portfolios Stanley, as well as Royal Bank of Canada and property platforms in order to buy in and Goldman Sachs’ mezzanine lending scale. business, were lined up to provide the The Sponda deal followed the firm’s Q2 facilities, secured by the bulk of Sponda’s financing of its OfficeFirst platform mixed-use portfolio of prime properties. portfolio, also led by investment banks, The five-year deal was understood to while China’s CIC was to swoop for comprise in the region of €2.2 billion of Brookfield’s Gazeley logistics platform later

Helsinki: prime properties senior debt plus mezzanine finance. in the year.

POPULAR STORIES ly created company that included a property gan were mandated as joint lead managers. portfolio with a gross book value of €30 billion AXA CLOSES ON €1.5BN transferred from Popular. MEASURES TO AVOID LENDING The investment management arm of French Santander, for its part, owned the remain- CLIFFS PROPOSED insurance firm AXA closed its 10th property ing 49 percent stake in the joint venture. As a The peaks in the last two real estate cycles debt fund in September, with €1.5 billion result, the property assets were no longer con- were predictable and lenders could have raised. solidated on Popular’s balance sheet. avoided massive losses if long-term asset values More than 25 percent of CRE Senior 10 had been adequately monitored, a group of – circa €400 million – had already been de- TERRA FIRMA’S £4BN ANNINGTON senior industry figures concluded in July. ployed, a quarter of which in the US, through REFINANCING The research was undertaken by the debt mortgage loans and bonds. CRE Senior 10 is Terra Firma, Guy Hands’ private equity firm, group within the Property Industry Alliance. AXA IM – Real Assets’ first debt fund to have closed a £4 billion (€4.6 billion) refinancing After considering three different approaches an initial mandate in the region, with an alloca- in July of its UK housing platform, the to monitoring long-term value, the group con- tion to the US of up to 25 percent. Annington Group, through a combination of cluded that an analysis of ‘adjusted market val- Commitments for the fund were received fresh debt and equity. ue’ is the most effective method – derived from 19 institutional investors across Europe, In addition to issuing £3 billion of corpo- from comparing current market value, as re- 84 percent of which invested previously in rate bonds and sourcing £400 million in flected in an appropriate capital value index, AXA IM’s real estate debt platform, as well as bank loans, the firm raised £550 million to a long-term trend line, drawn through an four new clients, the firm said. from existing investors through its Terra Fir- inflation-adjusted capital value index, such as ma Special Opportunities Fund 2, to con- the Investment Property Database’s All-Prop- BLACKSTONE’S €5BN SPANISH tribute fresh equity to the group. erty Capital Value Index. PLAY The recapitalisation allowed Terra Firma The analysis showed that when the IPD Blackstone agreed to buy a majority stake in to refinance securitised debt held against the index is more than 20 percent above the long- the Spanish property portfolio of Santander- housing portfolio, which had a 2021 maturi- term trend – as it was most recently in Q2 owned Banco Popular for an amount ty. The firm replaced the securitised debt 2004, three years before the crash – the likeli- understood to be around €5 billion. with an investment-grade financing with hood of a 35 percent or greater fall in the real The New York-based private equity real es- staggered maturities out to 2047, in addi- value of that index within five years is very tate giant took a 51 percent position in a new- tion to the new equity. Barclays and JPMor- high. n

24 REAL ESTATE CAPITAL MARCH 2018 REVIEW OF 2017:CAPITAL KEY STORIES WATCH

KEY DEALS

Lender Borrower Loan size (m) Asset(s) Notes Allianz Real Estate Bayerische € 290 Ireland’s Liffey Valley shopping Allianz acted as sole lender, providing a Versorgungskammer centre 7-year fixed-rate loan secured by 72,000 (BVK) sq m Dublin mall

LaSalle Investment GSA €100-plus Spanish student housing Loan provided through LaSalle's LREDS Management portfolio III fund

Barclays, HSBC, RBS, NewRiver REIT £430 Unsecured debt facilities Included £165m term loan and £215m Santander RCF

Wells Fargo, BNP Paribas, Intu Properties £488 Merry Hill Shopping Centre, 7-year senior debt facility at 53% LTV DekaBank and AXA near Birmingham, UK Investment Managers - Real Assets

Wells Fargo TPG Real Estate crica £300 Arlington Business Parks Financed the circa £450m acquisiton of the UK business parks from Goodman and L&G

Bank of China, China China Investment € 6,800 Logicor Loan jointly underwritten by the Chinese Construction Bank Corporation banks, with syndication planned, according to Basis Point. Supports €12.25bn purchase of the logistics platform from Blackstone Helaba, Berlin Hyp, pbb Ghelamco € 370 Warsaw Spire Senior loan to refinance the office complex Deutsche Pfandbriefbank located in the Polish capital

Bank club led by BNP Paribas Hammerson, Allianz € 625 Dublin's Dundrum Town 7-year loan at a sub-2% margin to and DekaBank Centre refinance the shopping mall JPMorgan Neinor Homes € 150 Loan to accelerate land 2-year loan written at an annual all-in cost acquisitions in Spain for below 450 basis points residential developments Citi, Morgan Stanley, Royal Blackstone € 2,600 Sponda property platform in Financing reflects a circa 75% loan-to- Bank of Canada, Goldman Finland value of the collateral and the senior debt Sachs is understood to be priced at just above 200bps

PEOPLE

• Michele Monterosso, the co-head of • Asset management giant BlackRock ING Real Estate Finance’s Italian lending hired Rupert Gill as portfolio manager business, was appointed to lead the in the European real estate debt team Dutch bank’s German and Austrian within its real assets division. In the newly property lending activities. He joined created position, Gill was hired to head ING in 2006 after periods working for the European real estate debt team KPMG and Cushman & Wakefield. and will be responsible for expanding BlackRock’s European commercial real • Christian Bearman, who joined loan estate debt business. Gill had previously servicer Situs as CEO of the European established a debt advisory business at business from Valad Europe in October Hatfield Philips. 2016, left to seek opportunities outside the firm in September. The European • Cushman & Wakefield hired Maud CEO position was a newly created Visschedijk and Maarten De Jong from role within Situs, which had been CBRE to join its real estate finance unit in expanding its operations in Europe the Netherlands. Visschedijk and De Jong since it was bought by US private will focus on structuring and arranging equity firm Stone Point Capital in debt for real estate investors and January 2015. developers’ activities in the Dutch market. Visschedijk: joined Cushman

MARCH 2018 WWW.RECAPITALNEWS.COM 25 CAPITALREVIEW OFWATCH 2017: KEY STORIES Q4|Investors turn to debt

Defining deal: BAML tests CMBS market

Bank of America Merrill Lynch proved Sterling-denominated AAA-rated CMBS there was investor demand for European spreads fell from nearly 200 basis points CMBS paper with its rare deal in November in July 2016 to less than 100bps in July 2017. The £347.9 million (€389.3 million) 2017, according to BAML’s Structured Taurus 2017-2 UK DAC was the only Finance Outlook 2018 report. public conduit transaction in Europe in Pricing in the deal was aggressive; 2017. 10 basis points below where AAA “Securitisation spreads have been spreads stood at the beginning of tightening for a while since there is very November, and 5bps lower than initial little you can buy to generate a proper price guidance. cash return,” Matthias Baltes, head of The AAA notes, which accounted for EMEA commercial real estate structured up to 32 percent loan-to-value of the

Logistics: BAML’s ‘last mile’ deal finance at BAML, told Real Estate Capital. underlying facility, priced at just 85bps.

POPULAR STORIES it will launch a new line in private real ern Europe, with a focus on the UK. estate debt management to be led by BROOKFIELD TO LEND IN Bertrand Carrez, who joined the com- GREENOAK CLOSES FIRST EUROPE pany in September from La Française EUROPEAN DEBT FUND Brookfield made plans to lend in the Asset Management. GreenOak Real Estate wrapped up UK through its fifth real estate debt The asset manager intends to launch fundraising for its debut continental fund, which closed on $3 billion in a dedicated private real estate debt fund European debt fund €100 million above mid-November, making it the largest in the first half of 2018. target. Jim Blakemore, the firm’s Lon- real estate debt fund that closed in don-based head of debt, said the firm 2017. LASALLE CLOSES THIRD launched the GreenOak Europe Se- Through the fund – Brookfield Real MEZZANINE FUND cured Lending Fund in the first quarter Estate Finance V – the firm can lend up LaSalle Investment Management closed of 2016 with a €500 million target. to 20 percent outside the US, with the its third mezzanine and whole loan fund “All of our Europe-focused funds fol- UK selected as its primary target with- on £804 million (€903 million). The low the same strategy: transitional lend- in Europe. Brookfield has invested heav- firm said the LaSalle Real Estate Debt ing. We’re lending on assets that are typ- ily in London, both as a direct buyer of Strategies III capital-raising was over- ically reasonably property intensive,” property and as the developer of subscribed and exceeded its initial £750 Blakemore said. “ schemes including the 100 Bishopsgate million target. Through the Europe fund, GreenOak office tower and its London Wall Place LREDS III attracted 17 investors is doing more portfolio lending than in JV with fellow Canadian Oxford Prop- from Europe, the Middle East, Asia and its UK vehicles, which Blakemore attrib- erties. the US. uted to timing in the different real estate The LREDS III closing, combined cycles. In one representative transaction AMUNDI ADDS REAL ESTATE DEBT, with the LaSalle Residential Finance for the Europe fund, the firm worked CLOSES THIRD FUND third tranche of £260 million secured with a local Dutch borrower which ac- France-based asset manager Amundi earlier in the year, brings the capital quired seven office properties with the said in November that it is expanding raised for the firm’s debt investment intent to sell one asset to one buyer and its private debt platform’s scope into platform to approximately £1.1 billion three to another buyer, then hold the the real estate debt market. Amundi said in 2017. LREDS III invests across West- four remaining properties. n

26 REAL ESTATE CAPITAL MARCH 2018 REVIEW OF 2017:CAPITAL KEY STORIES WATCH

KEY DEALS

Lender Borrower Loan size (m) Asset(s) Notes M&G Investments Lodha UK £517 1 Grosvenor Square in central Whole loan to fund residential development London to be completed in December 2019

Morgan Stanley London & Regional £575 Atlas hotel portfolio 5-year, floating-rate loan to refinance 48 hotels totalling around 5,800 rooms located throughout England, Scotland and Wales

Citi LendInvest >£200 Warehouse funding facility to Long-term funding line will allow the fintech fund LendInvest entry to UK's firm to provide specialist BTL loans over the BTL market next two years, with the aim of securitising the debt in the RMBS market

Allianz Real Estate, Helaba PGIM Real Estate € 300 Austria Campus office PGIM acquired the first three elements of the complex in Vienna scheme for more than €500m, which implies a 60% LTV financing

CMBS bond investors Bank of America £347.9 Taurus 2017-2 UK DAC Deal securitises a portfolio of ‘last mile’ Merrill Lynch logistics properties bought by Blackstone and M7 Real Estate in September

LBBW, ING Real Estate Oxford Properties € 625 Sony Center in Berlin 10-year debt financing with a LTV ratio of Finance, pbb Deutsche Group, Madison around 57% Pfandbriefbank International Realty

Allianz Real Estate, ABN Amro Amundi Real Estate, € 300 Atrium office complex in 7-year loan at 60%-65% LTV, priced around Korean investors Amsterdam, Netherlands 150bps-200bps

Allianz Real Estate, ING Real CTP Group € 160 Czech logistics portfolio 7-year debt financing with a LTV ratio of Estate Finance around 57%

BNP Paribas, Crédit Agricole, Amundi Real Estate, € 900 Coeur Défense office complex 7-year, fixed rate loan with a LTV of around ING, Natixis Crédit Agricole in Paris, France 50% Assurances, Primonial

Berlin Hyp, Erste Group Bank Immofinanz € 205 7 office buildings in Warsaw, 5-year, secured debt package replacing seven Poland existing, individual real estate loans

PEOPLE

• Barclays Corporate Banking reshuffled its • Paul Coates, former managing director real estate team following the retirement of Royal Bank of Scotland’s real estate of two senior bankers. Nick Mayberry finance unit, joined CBRE as executive has joined Barclays as head of real director and head of debt and structured estate for Scotland and the north of finance for the EMEA region of its Capital England, replacing David Hardcastle, Advisors business. who retired; Jess Tomlinson was appointed head of the south-east and • poached Lisa east regions, to replace the recently Attenborough from CBRE Capital retired Phil Edwards; Amy Crick, Advisors to launch a new debt advisory previously a transaction manager in practice. Attenborough spent more than Barclays’ specialist real estate team, has 10 years at Barclays Bank in a range succeeded Tomlinson in heading the of teams across structured property UK real estate transaction management finance, debt finance and latterly in the Coates: swapped RBS for CBRE team. corporate healthcare team.

MARCH 2018 WWW.RECAPITALNEWS.COM 27 IN FOCUS: 2017 INTERVIEWS Talking debt capital During 2017, Real Estate Capital interviewed some of the European real estate finance industry’s movers and shakers. Here is a taste of what they said

theme running through the interviews Real Estate Capital conducted with key market players last year was a belief that European real estate enjoys a liquid and functioning debt market. Finance is available for a In Focus

LASALLE INVESTMENT MANAGEMENT Avariety of property strategies, most agreed, even though the IN FOCUS: LASALLE INVESTMENT MANAGEMENT volume of deals needing finance reduced to a degree. ‘The mezzanine In speaking to bankers, debt fund lenders, borrowers and en- opportunity was not a window’ trepreneurs, the year’s interviews painted a picture of how debt Fresh from raising a third wave of capital for its lending strategy, LaSalle Investment Management debt boss Amy Aznar tells Daniel Cunningham that the market still is being used in Europe’s markets, the challenges of deploying needs those willing to provide higher leverage he market for European mez- zanine real estate finance has write the whole loan ourselves, taking the changed considerably in the underwriting risk, and then sell down the seven years since LaSalle Invest senior portion later. The market has become ment Management first raised capital to pro that capital and what sponsors need. On the following pages, we T - more sophisticated and borrowers’ demands vide it, reflects Amy Aznar, the firm’s head - around certainty of execution have changed.” of debt investments and special situations.

In 2010, LaSalle became one of the first THE SWEET SPOT non-bank debt fund managers to offer strips This year, Aznar’s team has raised £600 n of debt finance between the 55 and 80 per- revisit some of those interviews in abridged form. million of fresh capital, targeting parts of cent loan-to-value parts of the capital stack the market that remain under-banked. to opportunistic property investors which Alongside a capital-raising for its residential needed higher leverage than the banks could development strategy, LaSalle has brought provide. in £334 million for the third in its series of For lenders, internal rates of return in mezzanine and whole loan funds – LaSalle the order of up to around 14 percent were Real Estate Debt Strategies (LREDS) III achievable, as private equity players generated – which is targeting a final close in Q3 this mid-teens returns from investing in Europe’s year “well in excess”, says Aznar, of its pre- recovering real estate markets. Today, with decessor fund, which closed on £600 mil- returns thinner and a more liquid financing lion in 2013. market, IRRs look more like mid to high single The first LREDS fund generated much of digits. As the market has evolved, so has the its business through financing acquisitions product, Aznar explains. by opportunistic investors such as Benson “We started out lending pure mezzanine Elliot, Ares Management and Blackstone. and borrowers would come to us to ask for Indeed, LaSalle provided several mezza a junior tranche. They would then pair us up nine facilities to the latter as it built its with their preferred senior lender,” she says. - Logicor logistics platform from 2011 and “Over time, that morphed,” Aznar con which it recently sold for €12.25 billion to tinues. “We team up with the senior lender IN FOCUS: LLOYDS’ LEADERSHIP - China Investment Corporation. The second and we approach the borrower together. fund, and now the third, continue to target We blend the margins, or, alternatively, we acquisitions, although there is an increasing volume of business to be had refinancing “We’ve made it very JULY/AUGUST 2017 clear we want to WWW.RECAPITALNEWS.COM Lloyds is viewed by property market partici- increase our capacity to 31 pants as having staged an impressive recovery do the larger

since the crisis. The bail-out of the bank and underwrites and more the tighter regulatory environment mean that its lending is within stricter parameters than complex transactions” historically, but it is alsoProfile seen to be broadening Madeleine McDougall its lending capabilities. increased our client base and so we want to IN FOCUS: LLOYDS’ LEADERSHIP While Richard Dakin, now head of CBRE Capital Advisors, wasBLACKSTONE responsible for delever- support our existing clients but also continue aging the bank’s legacy real estate positions, to create new relationships. We lent £8.6 bil- the credit for rebuilding the real estate team lion last year, and although it was down from belongs to Feeney. McDougall played a role in £9 billion in 2015, that was in the context of that and is a popular and well-known figure a reduction of investment volumes, so we’ve in London property finance circles. grown our market share,” McDougall says. “Madeleine cameBorrowing in three years ago and Not a single deal was pulled after the Brexit immediately had an impact in developing vote, Feeney is quick to add: “Of course we our institutional franchise in terms of build- adjust pricing in line with market norms, but ing relationships with private equity clients, our commitment is enduring,” he says. Risk, continues McDougall, will be closely interacting withand sovereign wealth funds deliveringand traditional money managers, and she brought monitored: “Sixty five percent loan-to-value a great energyGadi and dynamism Jay and to that. Will It was Skinner is less of regular Blackstone than two, three tell years ago, but clear to me weDaniel had the Cunninghamperson we needed howwe they are in sourcean uncertain the environment debt and we PHOTOGRAPHY: MARCUS ROSE inside the team,”behind Feeney says.the firm’s Europeanwant toproperty make sure we lenddeals through the cycle. Our average LTV is in the 50s. There is a jux- McDougall’s recent deals have included - arranging two loans totalling £409 million taposition inThe the job market of sourcing in that the rental debt values, falls to prin s many US private equity firms (€453 million) for privately owned firm Lazari especiallycipals in the Gadi office Jay and market, Will Skinner.are tailing Jay off,worked withdraw from the late-cycleand yet capitalalongside values former continue finance to grow;head thatAnil Khera, Investments in January, allowingEuropean it toreal refinance estate markets, six of its key central London assets. She also can’t- lastwho much left longer.” Blackstone last August after 11 the largest of them all – Black The most recent De Montfort Univer- played a key role in the bank’s 2016 financing years to launch his own private rented stone – continues to raise and deploy capital of London’sA O2 arena, with a £185 million sity reportsector highlighted residential UK development banks’ role infirm. the Skin- for its European strategy. ner relocated to London from New York facility, of which 50 percent was subsequently market. Although volumes from that group fell The New York-headquartered firm is last September. syndicated to Industrial and Commercial Bank by 28 percent from the second half of 2016 to - investing through its opportunistic funds, So, how does Blackstone go about financ of China. the first half of this year, they collectively pro- Blackstone Real Estate Partners Europe IV,vided ingmore its than deals? £8 billion to the market in H1. lending. It’s still offices, retail, logistics, alter- which closed on €6.5 billion in March 2014, “We’re“We one have of the a besttrack capitalised record of banks delivering out OVERSEASas well CLIENTS as its fifth European BREP fund, natives. The advantage is that, despite having there,”on says deals, McDougall. so lenders “The know challenge that iswhen about we “Ever morewhich foreign had acapital, recent whether close on it €6.6is billion most recently headed institutional clients, I changingpick theup themarket phone perception, to them looking and ask after them Asian insurancein February. money or US private equity, have experience across varied clients sets at the existingfor terms client it is base not andtime growing wasted,” it. Asays key Jay. is coming Despiteinto the tight market, yields so across one of Europe, the Black- “There’s usually a deal to be done.” different banks.” strength of the business,” she adds, “is having Previously managing a team of seven, evolutionsstone at continues Lloyds has to been target an properties expansion to which As the equity team identifies a poten- - the support to be able to innovate. We had a beyondit a can very apply British its aggressive franchise assetto serving management tial purchase, Jay and Skinner immediately McDougall is now in charge of 65, including - very strong franchise in terms of our balance front-line bankers and support staff. Her chal clientstechniques. active in the That UK includes but from opportunistic every pur begin to evaluate the debt component chases of high-quality, well-located proper- sheet. I came in to accentuate the larger-ticket lenge is to continue the resurgence of Lloyds’ corner of the world,” comments Feeney. “It’s of the deal. “The financing is part of our ties, as well as core-plus assets for longer hold underwrites and grow the originate-to-dis- real estate business, which Feeney set in train an area Madeleine has been particularly underwriting,” explains Skinner. “We work activeperiods. in and will“Buy need it, fix to it,continue sell it,” tois be,the mantra. tributewith themodel.” rest of the team from day one to four years ago when he joined the bank from Dealogic figures show that Lloyds was the Feeney’s closest lieutenants within the business becauseDebt the market finance is isshifting a crucial and weaspect need of the think through the pricing and structure of Change at the top IN FOCUS: THE RISE OF HENDERSON PARKwhat was then Henderson Global Investors business. During 2016, acquisitions and UK’sthe debt. largest On distribution a large portfolio bank in transaction, 2016, syndi - take over his responsibilities. In 2015, Feeney and is now TH Real Estate. In 2013, Lloyds was to keep our franchise moving with it.” McDougallrefinancings takes were the reinssupported at a time by whenborrow - catingthat might the equivalent mean arranging of €1.5 multiplebillion. loans Madeleine McDougall has takenlater, over McDougall Lloyds’ is in the commercial top job at one of the real estatesplit the commercial business real from estate unit into six busy offloading the toxic real estate loans that ings of around €5.5 billion, making Black- broken“We’ve down made by it very geography clear we orwant sector. to increase We John Feeney. Daniel CunninghamUK’s talks largest realto estatethem lenders. about the handovercomponent teams, each led by a senior banker had contributed to the bank’s need for a state the UK clearers are perceived by many in the ne of the biggest jobs in UK and focused on an individual client group; as marketstone to perhapshave become the moreyear’s risk-averse largest sponsor. due to lookour capacity for a way to to do optimise the larger the underwrites cost of capital and The promotion happened alongside that bail-out. Feeney’s job was to rebuild a ‘good’ Financing volumes dropped sharply from property finance changed hands well as McDougall’s institutional clients team, the uncertainty following the UK’s Brexit vote. onmore the complex debt side transactions. to achieve a At better the same equity time, of her predecessor, Feeney, who has become Weber's book, repair the bank’s reputation as a property €13 billion in 2015 – a year during which 29 in August, when Madeleine the set-up included listed clients, major pri- But the business is in growth mode, she argues. outcome.” Lloyds’ global head of corporates, a role he took“They are large, institutional assets, some of background lender and generally reboot the business. several mega-deals, including the purchase In some cases, Blackstone will employ a debt McDougall officially became vate groups, developers, international clients “In the last three years we have sensibly WWW.RECAPITALNEWS.COM From left: Gadi Jay and Will Skinner on from the departing Clare Francis. which are throwing off a huge amount of cash “They’ve stuck to what they said they would of GE Capital’s European property assets, broker such as Eastdil Secured, particularly Discussing the transition into the new and private real estate corporates. A protégé of Mark McGoldrick, the head of Lloyds Bank Commercial Banking’sfrom his native US with Goldman Sachs in flow. That doesn’t sound very opportunistic,”- do,” comments one market player, “taking were financed. The previous year, €7 billion when the advisor has prior experience of a O 2000, he launched a mortgage business and admits Weber.“Now, “We’re I’m buying simply in core handling locations, a wider clientinvestment banker turned private real estate division, assuming the mantle from job, McDougall notes that Feeney remains on bigger tickets, doing full underwrites.” had been borrowed. built a specialon hand situations for unit.advice. Former “It Goldmanhelps that John’smaybe value-addbase,” assets,explains but McDougall.generating oppor “The underlyingequity chief known in the press as IN FOCUS: XXX XXX John Feeney, himself promoted within the bank. ApriL 2017 star bankerstill Mark on the McGoldrick same floor, was a somentor I can picktunistic his returns.”real estate fundamentals are the same across‘Goldfinger’, Nick Weber has held McDougall became a property banker in rEAL ESTATE CApiTAL Profile at the bank.brains,” He reunited she says. with “To McGoldrick be fair,” at chimes Definitionsin client such types; as it’s core still investmentand value-add or development prominent roles on Wall Street and in NOVEMBER 2017 22 Parking2003, after working as an investment strat- European private equity. the latter’sFeeney, private equity“you firmhaven’t Mount really Kellett needed in “getto”. blurred every which way”, Weber argues. egist within the industry. She joined Lloyds2009, where his most notable deal was the sale Henderson Park is targeting net returns to In 1994, Weber joined Goldman AXA INVESTMENT MANAGERS – The appointment of McDougall saw one of NOVEMBER 2017 from pbb Deutsche Pfandbriefbank in 2014 toof hotel chain Jury’s Inn to Lone Star following investors of 14 percent to 16 percent, meaning Sachs in New York. “I came out of REAL ASSETS manage the bank’s growing relationships witha restructuring. gross returns in the order of 18 percent to chemical engineering and ended up capitalan array of institutional clients. Just three years He struck out on his own in July 2016, on Wall Street,” he says. “One of my - 20 percent. “I think that’s a mix of value-add launching Henderson Park, with $500 million and opportunistic. There’s a real blurring of first bosses was Steve Mnuchin, the US - Henderson Park’s Nick treasury secretary.” of backing from US investor Stone Point Cap lines and it’s near impossible in this market PROFILE: AXA IM — REAL ASSETS Weber is targeting ital, as well as Middle Eastern players Kuwait to distinguish.” Weber began working with McGol 28 REAL ESTATE CAPITAL value-add opportunities Investment Authority and Wafra Investment The UK Hilton Metropoles are a case in drick in 1995 in Goldman's New York Advisory Group. By October this year, it was point, he explains. “We bought London and mortgage department. In 2000, he in a late-cycle market. understood to have raised $970 million of Birmingham’s largest hotels, and together they relocated to Europe with the bank to Europe’s wall of debt Profileinvestor capital – with additional co-invest- have combined revenues of around £100 mil- launch a European mortgage depart- maturities is helping to ment bringing its equity to around $1.4 billion. lion (€112 million) and throw off nearly £31 ment, before heading to Hong Kong to Weber does not seek publicity, but meeting run its non-Japan distressed business create them, he tells million in cash, but they need a lot of capex. It’s- DEKaBaNK him in his central London offices, located in a not a core deal, probably not even core-plus, and returning to London to build the Protect the Daniel Cunningham Georgian rowhouse close to Victoria Station, but we definitely believe we’ll earn opportun bank’s special situations unit. Real Estate Capital finds him eager to discuss istic returns.” In May 2009, he rejoined McGol- position or Nick Weber, former boss of The two assets, bought for exactly £500 drick, at the latter’s private equity firm, - the current market, his firm’s place in it, and Mount Kellett’s European business how debt will fit into the strategy. million, were sold by private investor Ton- Mount Kellett. Weber’s deals included and founder of real estate fund man - state, owned by 84-year-old property mogul leading the purchase and sale of the Timothé Rauly, AXA agement firm Henderson Park, theSticking to Jury’s Inn hotels group, with a 90 per WAVE OF MATURITIES Arthur Matyas. The assets were understood to Investment Managers – Fright investment opportunities tend to have Henderson Park’s first deal, in September have £420 million of relatively expensive debt cent-plus IRR and 3.25 times equity Real Assets’ new head of a story behind them. 2016, was the plush Le Méridien Etoile attached to them. Tonstate had initially tried multiple. funds group, tells Daniel In the 18 months since Henderson Park’sthe missionhotel in Paris, bought from Mount Kellett to sell the assets for £700 million. Weber and Mount Kellett was hit by its oil and Cunningham that launch, the firm has pursued a value-add and Cedar Capital. Subsequent deals Matyas are understood to have built a rela- gas investments and reached a deal maintaining the firm’s loan strategy amid a late-cycle European propDekaBank’s- real estate bossinclude Anni a UK Hönicke multi-family tells portfolio, a five- tionship and for weeks had a deal agreed in with Fortress Investment Manage- portfolio is his priority erty market. The assets the firm has pickedDaniel Cunningham why thestar AthensGerman hotel bank and two will of the UK’s larg- principle over a handshake. ment to co-manage funds. “I stayed up – including the largest hotels in Paris continueand to target large, primeest hotels deals, – the despiteLondon and Birmingham at Mount Kellett through September XA Investment Managers London and a grade A office building in Brexit,Madrid European electionsHilton and DonaldMetropoles. Trump 2015 to monetise the book before – Real Assets is by far the – have a distinctly prime feel to them. But, as leaving. I felt it was the right fiduciary largest of the non-bank lend MATURING DEBT ers which have carved a slice Weber explains, the current market createst is the day after UK prime minister admits. Financial ‘passporting’, he says, is a thing to do. Something like 80 percent ofA the European real estate financing- Theresa May revealed the country’s Calculatedrelatively at the recent end ofphenomenon, 2016, Europe and faces lenders five years of huge CRE debt maturities creating of the European real estate was turned market. opportunities for such properties to generate investment opportunities for firms like Henderson Park ‘opportunistic’ returns. Brexit plan and German real estate like140 DekaBank would adapt if those rights into cash before I left.” The investment arm of the French “If you look at our pipeline, 75 percent ofbanker Anni Hönicke is visiting were120 lost. “Don’t forget,” he says, noting After taking some time off to figure insurance giant was the first alterna- London. the bank’s US and Japanese operations, - tive lender to enter European property deals come from situations where somethingI out his future, Weber struck out on his The revelation that the UK will leave “DekaBank100 is a lender in various places debt, back in 2005. After the crisis, when needs to happen, either motivated by debt own in July 2016, launching Hender the European single market could under- outside80 the EU already. So things will be the banks retrenched and institutional son Park. He remains good friends with maturity, by swaps burning off, or bystandably a tenant spook a foreign banker whose different, but not necessarily new to us. money managers entered, the business 60 that cannot be held much longer,” hebusiness says. is partially built on lending into “As a euro-source lender we’ll have to McGoldrick, who is “front and centre” (known as AXA Real Estate until a Sep- To buy well, Weber continues, therethe UK. needs But if Hönicke, global head of be careful40 in the lead up to Brexit as there on his reference list for investors, he tember 2015 rebrand) was already ahead adds: “Mark’s as smart and commercial of the pack. to be an ‘off-market’ aspect to a deal.real Itestate could at Frankfurt-based DekaBank, could be20 extra volatility in the cross-cur- be a bank pushing a property owneris worried,to repay she isn’t showing it. “The big rency swap market. Whilst this has the as they come.” AXA IM – Real Assets is now near- 0 Netherlands Iberia ing a final close on its 10th commin- or refinance its loan, or it couldshock be a wasseller last June with the leave vote,” potential(€bn) mature to due debt of Volume to raise2017 our cost 2018of funds, we 2019 2020 2021 2022 2023 France gled senior property debt fund (CRE she says. “That was the surprise paradigm still remain confident aboutGermany our relative PHOTOGRAPH: JAMES CLARKE eager to seal a swift deal after failing to achieve 25 Senior 10) which had raised €1.4 billion shift, not yesterday’s speech.” competition position.”UK an open-market sale. “It doesn’t necessarily WWW.RECAPITALNEWS.COM by January and is targeting €1.5 billion, Even before the referendum, Hönicke “Before the Brexit result, the UK was mean distressed situations, but most of the with a final close expected this summer. deals we’ve done have involvedinsists, a motivated her view on UK lending was fixed. a perfectSource: market CBRE forResearch us,” Hönicke adds, The firm invests in the debt markets on “We decided that whatever happens we “and now the people have decided not to seller,” Weber adds. behalf of AXA insurance companies and will not change our relationship with be part of the EU, it is just in line with Weber is well-positioned to source such more than 40 third-party clients from the UK market. It is such a transparent many other big markets.” opportunities. After relocating to London DECEMBER 2017/JANUARY 2018 10 different countries. market, it’s so professional and there is After 10 years of doing business in the Its real estate lending book stands at such a deep investor community. It has so UK, DekaBank has applied for its London €10.5 billion. With infrastructure debt, DECEMBER 2017/JANUARYmany positive 2018 features. All that aside, the outpost to be upgraded from a represent- the platform comprises €14 billion. market needs transactions, and we really ative office to a branch. The paperwork In February, the job of managing believe that there will not be such a big is being processed with German banking the real estate funds, debt and equity, impact.” regulator BaFin, which also needs to be fell to Timothé Rauly, who joined the Speaking to Real Estate Capital with approved by the UK’s Financial Services company in 2006 from French REIT 24 REAL ESTATE CAPITAL Hönicke is Mark Titcomb, head of Deka- Authority. Bank’s UK representative office. There will “We’ve done more than 40 transac- be a few extra obstacles for an EU bank tions since we set up here and we have WWW.RECAPITALNEWS.COM lending into post-Brexit Britain, Titcomb been arranger or co-arranger on each,” 29

REAL ESTATE CAPITAL March 2017 26 DekaBank’s anni hönicke and Mark Titcomb

28 REAL ESTATE CAPITAL MARCH 2018 IN FOCUS: 2017 INTERVIEWS

The German banker: Anni Hönicke Visiting London the day after Theresa May announced that the UK would not seek access to the European single market, DekaBank’s real estate boss Anni Hönicke explained why the German bank would continue to see the UK as one of its key markets the lenders when a country produces bad news which, in turn, creates uncertainty.” The discussion turns to Donald Trump, who at the time was two days away from being inaugurated as the US president. Hönicke admits that she does not share the doomsday predictions of many on the likely effects of the Trump presidency on Europe. “I’m sure that because of Trump there will be a shift from monetary policy to fiscal policy. It starts in the US and nobody knows how quickly this will have an impact on Europe. The ECB and the Bank of England will like the idea of a change and will be able to slowly give up their unconventional monetary policy of recent years. he revelation that the UK will “I think there will be inflation in the leave the European single “THE LENDING US, higher interest rates, but there will be market could understandably MARKETS WILL higher growth and consumer spending and spook a foreign banker whose REMAIN VERY LIQUID corporate profits in the US will go up. Tbusiness is partially built on lending into OVER THE NEXT ONE There could actually be many good effects. the UK. But if Anni Hönicke, global head OR TWO YEARS WITH There could be a positive, or at least of real estate at Frankfurt-based INTEREST RATES STILL neutral, effect on real estate investment DekaBank, is worried, she isn’t showing it. REMAINING LOW” worldwide.” “The big shock was last June with the leave Hönicke agrees with the sentiment vote,” she says. “That was the surprise that DekaBank will have to work harder paradigm shift, not yesterday’s speech.” located prime retail and logistics. Core, and do more legwork to win the deals it Even before the referendum, Hönicke income-producing properties are wants on the terms it is determined to insists, her view on UK lending was fixed. favoured, although some element of asset stick to. “You have to kiss more frogs,” she “We decided that whatever happens we management is considered to spice up the says. “We maybe have to look at doing will not change our relationship with the portfolio. Leverage rarely strays beyond 65 smaller lot sizes, starting at €20 million, do UK market. It is such a transparent percent loan-to-value. Large underwrites more portfolios, maybe more market, it’s so professional and there is are possible, with loans subsequently management-intensive deals if our gut such a deep investor community. It has so syndicated to German savings banks. feeling tells us it’s a good deal. Maybe we many positive features. All that aside, the Talk drifts back to the prospects for the will syndicate a bit less. market needs transactions, and we really EU and European property markets. “The “There are so many new vehicles out believe that there will not be such a big lending markets will remain very liquid there, parties teaming up who you would impact.” over the next one or two years, with never have thought of – such as sovereign Hönicke’s strategy for DekaBank is to interest rates still remaining low. Even wealth funds and fund managers,” says target a handful of prime markets – though cross-border lending will not be Hönicke. “Every morning, somebody wakes Germany, the UK, France, Italy, the US and affected by the situation in Europe, up and thinks, ‘real estate is a good idea’.” n Japan – and write prime deals. DekaBank margins, which have bottomed out, will go focuses on big cities for offices and well- up in individual markets as a reaction of First published in March 2017

MARCH 2018 WWW.RECAPITALNEWS.COM 29 IN FOCUS: 2017 INTERVIEWS

the ‘fix it’ part of the plan is completed. The borrowers: Gadi Jay Floating rate loans written from banks’ balance sheets tend to suit most deals. Certainty of term is also crucial. “If, for and Will Skinner some reason, the market experiences Gadi Jay and Will Skinner are tasked with sourcing finance disruption, meaning that leasing is delayed for US private equity behemoth Blackstone’s European or the leverage is impacted for a time, it’s investment drive. Real Estate Capital spoke to them about important that we can continue to execute our business plan,” says Skinner. “We don’t how they do it want covenants that bite when they shouldn’t.” The European property lending market is liquid, Jay and Skinner argue. “There’s a good appetite for our deals,” says Skinner. “We have the luxury of having built up a reputation over time so lenders have the comfort that a deal has been well-screened.” Investment banks’ capacity for large underwrites means that the likes of Morgan Stanley and Bank of America Merrill Lynch have financed Blackstone across multiple deals. The originate-to-distribute model operated by such lenders requires Jay and Skinner to play an active role in supporting syndication activity by working alongside the originating bank to bring other lenders into the deal. “We’ll conduct asset tours, s many US private equity firms London from New York last September. answer due diligence questions, meet with withdraw from the late-cycle “We have a track record of delivering on banks that are interested in joining the European real estate markets, deals, so lenders know that when we pick syndicate,” explains Skinner. “This is a the largest of them all – up the phone to them and ask them for repeat game, so how we behave in a ABlackstone – continues to raise and terms it is not time wasted,” says Jay. syndication is important.” deploy capital for its European strategy. “There’s usually a deal to be done.” How has the lending environment Debt finance is a crucial aspect of the As the equity team identifies a potential changed during the political and economic business. During 2016, acquisitions and purchase, Jay and Skinner immediately turbulence of the past 12 months? refinancings were supported by borrowings begin to evaluate the debt component of the “The big-picture message is that, despite of around €5.5 billion, making Blackstone deal. “The financing is part of our geopolitical challenges and risks, the real perhaps the year’s largest sponsor. Financing underwriting,” explains Skinner. “We work estate banking system continues to operate volumes dropped sharply from €13 billion with the rest of the team from day one to and function. There are always some players in 2015 – a year during which several mega- think through the pricing and structure of who come in and out, that’s normal, but in deals, including the purchase of GE Capital’s the debt. On a large portfolio transaction, general it is a well-functioning market.” European property assets, were financed. that might mean arranging multiple loans For Jay and Skinner, continued The previous year, €7 billion had been broken down by geography or sector. We investment activity means maintaining an borrowed. look for a way to optimise the cost of capital array of lender relationships that it can call The job of sourcing the debt falls to on the debt side to achieve a better equity on when the firm springs for a transaction. principals Gadi Jay and Will Skinner. Jay outcome.” “We have a very dynamic investing worked alongside former finance head As well as sourcing the required volume philosophy,” says Skinner, “and so we need Anil Khera, who left Blackstone last of debt, covenants are an important part of our debt capital relationships to also be August after 11 years to launch his own any deal, explains Skinner. Pre-payment and dynamic and shifting.” n private rented sector residential asset-release flexibility are crucial for development firm. Skinner relocated to Blackstone, allowing it to sell assets once First published in April 2017

30 REAL ESTATE CAPITAL MARCH 2018 IN FOCUS: 2017 INTERVIEWS

it’s difficult to say when the cycle will end – it could easily be in five years’ time. Having said that, we want to remain super-cautious so our risk appetite is lower than it was.” Lending during 2016 was done primarily via participations in syndicated loans, rather than originating bilateral debt. Between 2012 and 2014, when there was limited liquidity in Europe, the firm used its balance sheet to underwrite loans at higher margins than are on offer today. As liquidity returned, the firm shifted its strategy to focus on taking secondary participations. “It’s about looking at as much paper as we can, to remain selective,” says Rauly. “When you spend less time originating and more time comparing value from one deal to another you can offer better value The senior debt fund for the benefit of the clients than if you are focused on originating a certain volume over a certain period, which is often done manager: Timothé Rauly to the detriment of pricing.” In April, Real Estate Capital headed to Paris to meet AXA An increased focus on the US market is Investment Managers – Real Assets’ recently promoted likely. “Eighteen months ago, pricing was far more appealing in the US than in continental head of funds group, Timothé Rauly Europe. The discrepancy is less obvious now, but there is a different risk. The US does not XA’s real estate debt business is you risk losing your track record and your have the exact same type of sponsor or the viewed in the market as a traction with investors.” same letting market as Europe, for instance. consistent, large-scale lender The European property cycle, suggests New York does not behave like London or which faces the challenge of Rauly, is “advanced”, meaning that the firm’s Paris. There is a premium and there is Afinding large lending opportunities to approach to business will be more cautious diversification benefit.” reinvest capital as it repays. “In a sense, it is in 2017, with an emphasis on the most Talk turns to the challenges faced by trying to keep pace as much with itself as core investments, and a little more risk in European real estate finance. Rauly is clear the market,” says one debt fund manager. specific transactions. where he sees the potential problem in the Speaking to Real Estate Capital at the market. “It’s a pricing matter,” he says. “You firm’s Paris HQ, located amid the towers of “IF YOU TRY TO GROW can do some bad financing later in the the La Défense commercial district, head TOO MUCH IN THE cycle. If you do it at a super-tight spread, of funds group Timothé Rauly explains that LAST PART OF THE it’s much more challenging, in particular in his medium-term task on the debt front is CYCLE, YOU RISK an environment where the interest rates to maintain rather than grow the debt LOSING YOUR TRACK are zero, so you have no cushion to absorb portfolio. “The current investment capacity RECORD” losses with the exception of your spread.” is designed to replace our former funds, Investor demand for exposure to real which are already in their run-off phase. We estate debt does not wane at the advanced are not trying to grow our book or our “The model we operate is that the team part of the cycle, Rauly says. “It’s up to us to lending capacity at the moment. looks at as much of the market as it can for make sure we are comfortable with what “We know that when there are us to make sense of the risk/return we are pitching to investors and that we are conditions in the market that make lending perspective,” explains Rauly. “If we look at in a position to deliver what we think is on a larger scale more appealing, we would €50 billion of potential deals each year and achievable.” n be able to raise capital rapidly. If you try to invest in around €2.5 billion, that’s a 5 grow too much in the last part of the cycle, percent hit rate. Given where valuations are, First published in May 2017

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The mezzanine debt fund manager: Amy Aznar Fresh from raising a third wave of capital for its lending strategy, LaSalle Investment Management debt boss Amy Aznar told Real Estate Capital that the market still needs those willing to provide higher leverage

he market for European Lending further up the capital stack than mezzanine real estate finance senior banks has no doubt become a lot has changed considerably in the more challenging than it was in 2010. A seven years since LaSalle larger number of non-bank lenders are TInvestment Management first raised capital aiming to write high-leverage loans in a to provide it, reflects Amy Aznar, the firm’s late-cycle market in which value-add head of debt investments and special strategies generate returns far below those situations. on offer at the start of the decade. In 2010, LaSalle became one of the first Aznar acknowledges that the mezzanine non-bank debt fund managers to offer proposition has changed from a lending strips of debt finance between the 55 margin and IRR perspective: “Early on, just percent and 80 percent loan-to-value parts after the financial crisis, pricing on of the capital stack to opportunistic mezzanine was much wider because there property investors that needed higher was a massive dislocation in the finance leverage than the banks could provide. “THE MARKET HAS market, and while standard mezzanine was For lenders, internal rates of return in BECOME MORE in the 12 percent to 14 percent range, it the order of up to around 14 percent were SOPHISTICATED has now settled at more sustainable levels achievable, as private equity players AND BORROWERS’ – between 7 percent and 11 percent.” generated mid-teens returns from investing DEMANDS AROUND The ability to underwrite whole loans, in Europe’s recovering real estate markets. CERTAINTY OF with a view to selling down the senior Today, with returns thinner and a more EXECUTION HAVE tranche, can give lenders an edge in liquid financing market, IRRs look more CHANGED” winning deals, Aznar explains. “If you like mid to high single digits. As the market blend the senior and mezzanine you can has evolved, so has the product, Aznar achieve a very competitive margin on the explains. £600 million (€677 million) of fresh loan at these low interest rates and lock in “We started out lending pure capital, targeting parts of the market that long-term financing that’s very accretive mezzanine and borrowers would come to remain underbanked. to equity.” us to ask for a junior tranche. They would “For us, LTV of up to 75 percent to 80 The investor base for private debt has then pair us up with their preferred senior percent was always our sweet spot,” says widened, Aznar argues. She notes a higher lender,” she says. Aznar. “What has changed is that the senior count of UK institutions in the latest “Over time, that morphed,” Aznar attachment point has crept up a bit since fundraising, alongside continental continues. “We team up with the senior the early days – not dramatically – from 55 European, Asian and US insurers and lender and we approach the borrower percent to around 60 percent. But due to pension funds. together. We blend the margins, or, the regulatory environment and constraints “Real estate mezzanine debt didn’t exist alternatively, we write the whole loan on banks, senior LTVs have been kept in in Europe in the form that it currently does ourselves, taking the underwriting risk, check. That’s why the mezzanine market before the global financial crisis. It was a and then sell down the senior portion later. has persisted. Some people in 2010 said thinner, higher-risk part of the structure. The market has become more sophisticated that it was a window resulting from the These days, it’s become a more appropriate and borrowers’ demands around certainty market dislocation rather than a persistent product for institutional investors.” n of execution have changed.” investment opportunity. But the mezzanine This year, Aznar’s team has raised opportunity was not a window.” First published in July 2017

32 REAL ESTATE CAPITAL MARCH 2018 IN FOCUS: 2017 INTERVIEWS

lent £8.6 billion (€9.8 billion) last year, and although it was down from £9 billion in 2015, that was in the context of a reduction of investment volumes, so we’ve grown our market share,” McDougall says. Risk, continues McDougall, will be closely monitored: “Sixty five percent loan- to-value is less regular than two, three years ago, but we are in an uncertain environment and we want to make sure we lend through the cycle. Our average LTV is in the 50s. There is a juxtaposition in the market in that rental values, especially in the office market, are tailing off, and yet capital values continue to grow; that can’t last much longer.” While pointing out that Lloyds is one of the best-capitalised banks in the market, McDougall says the challenge is about The UK bankers: changing the market perception, looking after the existing client base and growing it. “A key strength of the business,” she adds, Madeleine McDougall “is having the support to be able to innovate. We had a very strong franchise in terms of and John Feeney our balance sheet. I came in to accentuate the larger-ticket underwrites and grow the Madeleine McDougall took over Lloyds’ commercial real originate-to-distribute model. estate business from John Feeney last year. The pair met “We’ve made it very clear we want to Real Estate Capital to discuss the transition increase our capacity to do the larger underwrites and more complex transactions. ne of the biggest jobs in UK “WE’VE A MORAL At the same time, we remain a significant property finance changed OBLIGATION TO balance-sheet lender,” she adds. “Very few hands in August, when HAVING A players out there see the amount of data we Madeleine McDougall HEALTHY SECTOR” see, so I want us to become more Oofficially became head of Lloyds Bank sophisticated in how we use that data.” Commercial Banking’s real estate division, McDougall’s views on the real estate assuming the mantle from John Feeney, every corner of the world,” comments lending market have been shaped by her himself promoted within the bank. Feeney. “It’s an area Madeleine has been early years working in the sector. From Feeney has become Lloyds’ global head of particularly active in and will need to 2003 she witnessed the peak of the last corporates, a role he took on from the continue to be, because the market is cycle, and continued to do business through departing Clare Francis. Previously managing shifting and we need to keep our franchise the lean years when few banks were active a team of seven, McDougall is now in charge moving with it.” in the space. of 65, including front-line bankers and McDougall takes the reins at a time “We need to keep in mind short-term support staff. Her challenge is to continue when the UK clearers are perceived by volatility, but also how the market is the resurgence of Lloyds’ real estate business, many in the market to have become more changing over the long term, with factors which Feeney set in train four years ago. risk-averse due to the uncertainty following such as sustainability and technology. We “Ever more foreign capital, whether it is the UK’s Brexit vote. But the business is in have a moral obligation to having a healthy Asian insurance money or US private growth mode, she argues. sector; it’s about helping to create that as equity, is coming into the market, so one of “In the last three years we have sensibly much as it is about the systemic risk of one the evolutions at Lloyds has been an increased our client base and so we want organisation.” n expansion beyond a very British franchise to support our existing clients but also to serving clients active in the UK but from continue to create new relationships. We First published in November 2017

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impossible in this market to distinguish.” The private equity In the next four to five years, says Weber, the wall of European real estate debt which is due to mature will create situations where manager: Nick Weber quality assets, which have been underinvested A rising star in the fund management world, Henderson throughout the crisis, need to be Park made its mark on 2017. Nick Weber, the former Mount recapitalised. “Aside from the UK and Ireland, and to Kellett and Goldman Sachs executive who founded it, an extent Spain, Europe’s banks haven’t explained how debt influences what he does really sold much. Most moved their loans to a hold-to-maturity book. It was absolutely the right play. Equity values have come up and banks have started to earn money, so they are able to provision their loans,” Weber explains. Swaps, sold to sponsors at the height of the market, are gradually burning off, alleviating another barrier to owners readying assets for sale. “Something like $500 billion of debt is coming due and a lot of that debt was struck when rates were very high, so a large proportion of it was swapped. Banks need to deal with their loans. When they reach maturity, they cannot extend or hide them anymore. So, it’s really the wave of maturity that is driving a lot of activity,” Weber argues. As for how Henderson Park approaches or Nick Weber, former boss of needs to be an ‘off-market’ aspect to a deal. sourcing debt to finance its own investments, Mount Kellett’s European business It could be a bank pushing a property owner Weber says his own experience in the and founder of real estate fund to repay or refinance its loan, or it could be European markets helps. “I’ve been here 18 management firm Henderson a seller eager to seal a swift deal after failing years – we have an experienced team and so FPark, the right investment opportunities to achieve an open-market sale. “It doesn’t we know a lot of the debt lenders.” tend to have a story behind them. necessarily mean distressed situations, but To date, the firm’s deals have been funded In the 18 months since Henderson Park’s most of the deals we’ve done have involved a with senior finance obtained from banks. launch, the firm has pursued a value-add motivated seller,” Weber adds. “We tend not to work closely with debt strategy amid a late-cycle European property Definitions such as core and value-add funds, because they are generally trying to market. The assets the firm has picked up – “get blurred every which way”, Weber provide higher-leverage whole-loan including the largest hotels in Paris and financing,” Weber explains. “We tend to be London and a grade A office building in 60 percent to 65 percent loan-to-value Madrid – have a distinctly prime feel to “SOMETHING borrowers. The odd deal might have 70 them. But, as Weber explains, the current LIKE $500BN percent LTV for a period of time, but it is market creates opportunities for such OF DEBT IS generally less. We’re not high-leverage guys; properties to generate ‘opportunistic’ COMING DUE” we like to sleep at night.” returns. Finance is readily available to the right “If you look at our pipeline, 75 percent of argues. Henderson Park is targeting net sponsors, Weber insists. “Certain borrowers deals come from situations where something returns to investors of 14 percent to 16 get access to things in the market that others needs to happen, either motivated by debt percent, meaning gross returns in the don’t. The market differentiates quality of maturity, by swaps burning off, or by a tenant order of 18 percent to 20 percent. “I think borrower and operating partner.” n that cannot be held much longer,” he says. that’s a mix of value-add and opportunistic. To buy well, Weber continues, there There’s a real blurring of lines and it’s near First published in December 2017

34 REAL ESTATE CAPITAL MARCH 2018 DATA

The year in data

18bps Increase in average $10bn European loan margins Capital raised by Europe-only property debt between spring and funds in 2017, an increase of 141 percent autumn 2017 to 242bps, year-on-year, according to Real Estate according to Cushman & Capital data Wakefield

€2.6bn The size of Blackstone’s €40.6bn Sponda platform The volume of syndicated commercial financing in Finland. The real estate lending in the EMEA region debt facility was provided in 2017, down 15% year-on-year, by US investment banks according to Dealogic Citi and Morgan Stanley, as well as Royal Bank of Canada and Goldman Sachs’ mezzanine lending €104bn business The sale volumes of non-core real estate debt and lender-owned properties in Europe in 2017, more than double 2016’s, $1.7trn with Spain accounting for €50.8bn, Global real estate ‘dry according to powder’ driven by stronger economic growth, greater debt availability and growing 23% investor confidence, said The portion of new origination backing the CBRE Global Investor development finance in the UK, showing Intentions Survey 2017 an uptick in liquidity, according to De Montfort H1 2017 figures

MARCH 2018 WWW.RECAPITALNEWS.COM 35 DATA

250 €30bn The gross book value The number of active lenders in the UK market, according to in June of Banco Popular’s real estate portfolio. In August, Blackstone acquired a 51 percent stake in the portfolio, €6.8bn with Santander retaining the remaining The size of the loan reportedly provided by Bank of China and China Construction stake Bank to fund CIC’s acquisition of Europe’s Logicor platform; a deal which European property bankers did not get to see €1 The price Santander paid for Banco Popular in June 2017 to create €1.5bn Spain’s biggest bank The capital raised at the close of AXA IM – Real Assets’ 10th property debt fund, Europe’s largest real estate debt fund 3% closed in 2017 Risk adjust return of UK senior commercial property debt by Q4 2017, according to £17.6bn CBRE New UK loan originations completed in H1 2017, which represents a 24% decline from 60% the previous six months, and 18% down year-on-year, according to De Montfort Loan-to-value ratio in major European cities, which is still low by historical standards, according to Cushman 209bps & Wakefield’s Lending Margins offered by lenders on UK prime Survey for Spring 2017 offices in H1 2017, up by 11bps from year- end 2016, according to De Montfort

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