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A new debt fund is to begin lending on property in Germany and the Benelux countries.
Michael Morgenroth’s Caerus Real Estate Debt Fund 1 has raised an initial €70m from two investors “which we want to invest as soon as possible”, he said.
Gothaer, the German insurance group, has committed €50m alongside Reichmuth & Co, a Swiss private bank which has invested €20m.
The fund will make loans with loan-to-value ratios of between 50% and 80% and is targeting a 6%-7% distribution. It focuses on assets in Germany, Austria and Switzerland and Morgenroth says it will also “consider financing in the Benelux countries”.
It will be managed by Dusseldorf-based Caerus Debt Investments, formed by Morgenroth with chief investment officer Patrick Zuchner, after a management buyout from Austrian property investor Signa Group last year.
Before that, Morgenroth was a member of the management board at Gothaer. He is also on the board of INREV.
The eventual target for Luxembourg-structured Caerus Real Estate Debt Fund 1 is €300m and the minimum investment is €10m. It has already received an AIFM authorisation from the Luxembourg regulator CSSF.
Morgenroth said that the fund’s first close was “confirmation that institutional investors are increasingly discovering real estate debt as an attractive asset class for their portfolios”.
Jane Roberts, editor
Private investor and former UBS banker Wilson Lee has created a £400mm co-investment venture with alternative asset manager Värde Partners and real estate investment manager Stainton International to acquire properties across secondary markets in the UK.
The venture has just financed its second acquisition, the Sapphire portfolio of 28 UK distressed industrial assets which it bought from Royal Bank of Scotland’s West Register division late last year.
RBS provided just under £40m of new senior debt for a four-year term to refinance the assets which the investors bought for £65m.
Their first acquisition last summer was the £17m purchase of a 230,000 sq ft distribution facility on Gillette Way in Reading, leased to Procter & Gamble.
The partners’ strategy is to buy buildings that need asset management, often with short-term tenants or some vacancy; stabilise the assets; and sell them on within two to five years.
As the primary capital investor, US-based Värde Partners has committed a minimum of £150m with the willingness to allocate significantly more.
Varde has invested $1 billion in European real estate deals since the global financial crisis. Last month the US firm backed Kennedy Wilson’s £910m initial public offering, taking shares in the new quoted fund in return for its share of 1.2m sq ft of seed assets, the Tiger portfolio bought from Glanmore Property Fund.
Stainton is a co-investor alongside Varde and Lee and responsible for origination and asset management. Lee is a co-investor, sits on the board and is involved with all capital decisions.
Hansteen has refinanced its 90-asset German industrial property portfolio with two new loans totalling €343m from material new lenders to the group.
AXA REIM is lending to Hansteen for the first time, as part of a four-lender club, while HSBC is solely underwriting the second loan as part of a strategic push to increase continental property lending.
AXA’s participation was about €53m of a €235m, five-year loan from four lenders. The facility replaces €231m of stapled debt which UniCredit provided four years ago for the industrial REIT’s purchase of the HBI portfolio of 34 repossessed German industrial assets from the bank. AXA’s sweet spot is typically larger office, retail and logistics lending.
“UniCredit provided lending at 80% LTV and a low margin [1.1%]. In the last four years we’ve reduced the loan’s leverage substantially. For UniCredit this was part-and-parcel of sorting it out; it didn’t want to roll the loan on,” explained Morgan Jones, Hansteen’s joint chief executive.
Helaba led the four-lender consortium, providing €75m. Swedish SEB and Natixis Pfandbriefbank also each contributed circa €53m. The LTV ratio is 51% with hedging against 80% of the loan resulting in an all-in interest cost of 3.5% per annum excluding fees.
“The refinancing is a significant fillip. Continental lenders have been relatively shy; multi-let industrial has not been flavour of the month – it’s tended to be big office blocks in Frankfurt”, Jones said. “But given we’re recently out of the banking crisis it’s a good sign to see French and German lenders happy to issue new loans on this type of product; it’s quite a new trend I think”.
A second, €108m loan has been secured from HSBC which is “actively trying to go into Europe”, Jones said. The new five-year facility at a 48% LTV refinances a €140m Bank of Scotland-originated loan costing 3.2% all in, used for various acquisitions and due to expire this coming October.
“That loan has always done very well but [Lloyds] wants to get out of Europe,” noted Jones.
Hansteen has hedged €55m of the new loan, resulting in an average interest cost of 2.9% per annum, excluding fees.
“The transactions are impressive for their scale and the cost of debt achieved by Hansteen. Moreover, the company has introduced an entirely new roster of lenders”, wrote equities research house Liberum in a note about the refinancing.
Hansteen’s German portfolio, valued at c €600m, encompasses 1.5m sq m of multi-let industrial estates leased to 1,800 tenants across Germany in cities like Berlin, Hamburg, Düsseldorf and Munich. Average leases are five-years, although retention and net occupancy in Germany over the past two years has seen the group gain more tenants than it has lost.
Lauren Parr, news editor
CBRE Global Investors has appointed former Schroders director Mike Clarke as head of investor services in EMEA.
Clarke will fill the role vacated by Giles King, who resigned last September along with CBRE GI colleagues Simon Farnsworth and Ian Harris to set up a new business called Westmount.
Clarke will head investor relations, equity raising and targeting new investors and support development of new investment strategies. He will be a member of the EMEA management board.
After working at Schroder Property for 18 years, Clarke left to work at Chicago-headquartered multi manager Mesirow Financial where he invested mainly US capital in Asian and some European funds.
CBRE GI’s CEO, Pieter Hendriske, said Clarke brought “a wide range of experience from capital raising and investor relations to fund management”. He will join on 24 March and be based in London.
His role at Mesirow will be taken over by the firm’s US consultant Courtland Partners which recently opened its first European office, in London, overseen by Gianluca Romano.
Mesirow has not been a very active investor in Europe over the last couple of years, focusing more capital on Asia and the US.
Jane Roberts, editor
Bank of America Merrill Lynch has syndicated €318m of a €935m loan which it made to Lone Star to buy the Coeur Défense office complex in Paris.
AXA Real Estate has taken 34% of the loan across both the senior and stretched senior tranches.
The US bank underwrote all the debt it advanced to Lone Star for the private equity firm’s €1.3bn acquisition of the French tower and had been considering distributing the debt either through syndication or a securitisation, keeping €100m on its own balance sheet.
AXA Real Estate’s decision to take such a large participation means that BAML’s first choice now is thought to be syndication of the remaining €517m between three or four other investors, most likely banks. BAML’s Gregory Clerc is working on the distribution.
BAML declined to comment.
A potential investor who had heard of the process said that a margin of 180-200 basis points is offered for the 60% loan-to-value senior tranche, with a higher margin for the stretched senior debt, comprising a tranche up to 72% LTV.
AXA has become one of Europe’s biggest non-bank investors in property debt and has been seeking to invest at the rate of €2.5bn pa. In October, the insurance group announced it had additional capital to invest, from sovereign wealth fund Norges Bank Investment Management.
Taking part of the stretch senior of the Coeur Défense loan will enable the insurance company to boost its return at a time when returns from senior debt on top quality buildings are under pressure. AXA is not thought to have made many investments in its home French market which has become more competitive.
In December, Real Estate Capital reported that AXA had won the mandate to finance Ashby Capital’s 200 Aldersgate office building in the City with an offer at a margin below 200bps. Société Générale fronted the £135m deal but AXA took the whole loan.
Lone Star managed to acquire Coeur Défense at a price 40% lower than the building’s €2.1bn sale at the top of the market, in 2007, to Lehman Brothers. Lehman also lent all the senior and mezzanine on the purchase and securitised most of the €1.64bn of debt in Windermere XII. The capital structure has been protected until now under the French safeguard procedure.
Lauren Parr, news editor
Aareal Bank announced this morning that it lent €10.5bn on property last year, comfortably exceeding its €8bn target.
The German specialist property lender, which lends in 20 countries including the UK and Germany, said the €10.5bn of new business was the highest since 2007. In 2012, when Aareal reined in lending early in the year following the flare up of Eurozone problems in 2011, the bank lent €6.3bn.
The proportion of lending in 2013 that was newly-originated business rather than refinancing also rose, to 61.6% compared to 47.2% in 2012.
This year, the bank expects a continued global recovery, but says the key issue will be markets’ response to a normalisation of money supply, which it says does “hold risks”.
For 2014, the bank is targeting €8bn to €9bn of new lending on property, lower than the 2013 achievement. However, last year it raised its initial target part-way through the year.
Some of its biggest deals last year were lending €140m to Segro and CPPIB’s European Logistics Partnership, £175m on five Radisson Blue hotels in London and over £230m to F&C REIT in two acquisitions, to buy the Bon Accord and St Nicholas shopping centres in Aberdeen as well as malls in Grimsby, Inverness and Burton-on-Trent.
Commenting on 2013’s volumes, Aareal said: “This was against a background of a more active transaction environment, characterised by higher liquidity than originally expected. On the one hand, this offered greater new business opportunities to be exploited, from the start of the year onwards. On the other hand, it was associated with higher loan repayments”.
It added that “good” lending margins and low funding costs for the bank also had “a positive effect”.
The bank’s return on equity before tax improved from 7.2% to 8%, although it is still lower than the board and investors would like and the medium-term target remains 12%. Consolidated operating profit rose 12% to €198m from €176m in 2012. Property lending is the largest part of Aareal’s business and accounted for €209m of pre-tax profit. The bank’s consulting/services segment made an €11m loss.
Alongside the pick up in property market activity, Aareal said the improvements in results were driven by “a significant increase in net interest income, which rose considerably in the year to €527m (€486m)” with ‘the good margins achieved in the lending business, low funding costs, and effects from repayments that were higher than expected” the main drivers.
The bank raised €3bn of its €4.1bn capital markets funding last year from issuing pfandbrief – Germany’s mortgage covered bond market.
The strong results mean the SDAX-listed bank will finally re-start paying a dividend to its shareholders; the proposal announced today is €0.75 per share. It is looking to raise net income this year to the range €610m-€640m from 2013’s €527m, and profits from €198m to €220m-€240m.
The bank’s first property lending acquisition, Corealcredit Bank from vendor Lone Star, announced in December and due to close on 31 March 2014, will benefit net income and profits this year.
“The key issue that will drive developments during the current year will be the markets’ response – including those outside Europe and the US – to a normalisation of money suppy” it said. “This holds risks for global economic developments. Considering the anticipated low inflationary presssure in the eurozone, Aareal Bank believes that the European Central Bank will keep its key interest rates at a low level – consequently, short-term interest rates in the eurozone are likely to remain low”.
Jane Roberts, editor
Real Estate Capital has been acquired by international publisher PEI Media.
Real Estate Capital is joining PEI’s portfolio of print and digital publications that includes PERE, the title dedicated to international private real estate markets.
Jane Roberts will continue to be editor of Real Estate Capital with Alex Catalano acting as consultant editor. The existing team will be joined by more journalists in the coming months and coverage will be expanded to more markets and through upgrading the title’s website.
PEI’s editorial director, Philip Borel, said: “Real estate financing has continued to evolve since the global financial crisis and the appetite for authoritative coverage of the deals, the firms and the trends shaping these market globally is now greater than ever. The idea of having such a highly-respected team join us at a time when the real estate finance markets are gathering momentum was very exciting. It’s a very good fit”.
Real Estate Capital believes that PEI has the right resources to help accelerate our growth and that the company shares our approach to delivering quality journalism. The opportunity is to deliver the same level of informed analysis but on a wider geographic basis and by making the best use of both print and online channels.
David Hawkins, PEI co-founder, said Real Estate Capital was “a powerful brand.. We feel that the global real estate markets are entering a significant new phase and to have Real Estate Capital become part of our proposition is compelling”.
PEI has acquired Real Estate Publishing in an all-cash deal. The company was formed four years ago when Jane Roberts and Alex Catalano bought the title EG Capital from Reed Business Information and relaunched it as Real Estate Capital.
PEI is an independent financial media group covering the alternative asset classes of property, private equity, private debt and infrastructure. It was formed in an MBO from Euromoney Institutional Investor in 2001 and now employs 125 people in London, New York and Hong Kong.
Jane Roberts, Real Estate Capital