Palatium duo join Cordea Savills to set up property debt platform

Former Palatium directors Keith Davidson and James Tarry have joined Cordea Savills to establish a European property debt business.

Justin O’Connor, chief executive officer of Cordea Savills said the Davidson and Tarry will work closely with the team who will invest capital raised for the Prime London Residential Development Fund. The fund will make mezzanine loans to developers as part of its strategy.

Davidson and Tarry will also create investment vehicles to provide new investment finance, potentially including originating senior debt, or to acquire existing finance arrangements at attractive risk-adjusted rates of return.

O’Connor said that investment firms now “needed to have specialist debt skills as a fundamental requirement because investors want the best risk-adjusted returns and debt can offer that.  We have treasury experience on the borrowing side, but in addition we need lending as well as borrowing experience”.

He said that Davidson and Tarry would also advise across the business “on the optimum ways to manage debt exposure. In an environment where every 10 basis points is important for returns, we are asking: ‘what is the optimal debt/equity structure?’”.

Davidson, previously managing director at Palatium, and Tarry, formerly a director, will be co-heads of debt investment.

They joined Palatium Investment Management, run by Paul Rivlin and Neil Lawson-May, from Citi’s property debt group in 2008, to help launch a European mezzanine fund, but debt-raising proved tough at the time.

Instead, Palatium set up Tonnant, a fund which invests in CMBS, and also manages Glastonbury Finance 2007-1, a £355m real estate CDO.

Prior to that, they were both at Eurohypo.

Cordea Savills hopes to reach a first close for the Prime London Residential Development Fund next month.

Jane Roberts, editor