Edinburgh-headquartered asset management firm abrdn is planning to expand its real estate lending activities into continental Europe through a planned €1 billion senior lending vehicle, which it aims to have in place before the end of the year. The lending strategy will be the firm’s first to be dedicated to continental Europe, with its previous vehicles having been focused on the UK.
Speaking to Real Estate Capital Europe, Martin Barnewell, investment director of commercial real estate debt at abrdn, said the firm is aiming to raise €1 billion of new capital for the senior lending strategy during 2023. The capital is likely to be raised from predominantly segregated account mandates.
In the past decade, the £508 billion (€572 billion) manager, which operates a £3 billion real estate debt portfolio, has focused its real estate lending on the UK through its abrdn Commercial Real Estate Debt fund, through which it has a diversified portfolio of predominantly senior, investment grade real estate debt assets.
Barnewell said abrdn sees an expansion into continental Europe is a “natural progression” of the firm’s lending business.
“Europe is slightly behind the UK, in that it is still very bank dominated. A smaller percentage of the market is non-bank lenders, and I think with regulation and the changes in those markets, you will see those non-bank lenders grow in importance. That is a good thing for borrowers and lenders in continental Europe,” Barnewell commented.
The proposed strategy will look to emulate the business’s UK lending platform by procuring senior loans – with a focus on office, residential and logistics – ranging between €20 million and €150 million, although the firm expects the core business to be between €40 million and €80 million.
Through the vehicle, abrdn will aim to be in line with senior lending return targets in the market, which Barnewell said would aim for a “total return of 3-4 percent – base rate plus margin – which should give a pickup over corporate bonds”.
Barnewell added that this has been a “long-term” strategy for the firm. He explained it planned to establish a “high quality track record in the UK” before replicating its lending business in continental Europe and, eventually, globally.
The firm’s proposed European lending platform will look to finance projects across Europe, with a particular focus on Ireland, France, Germany, Spain and the Benelux.
Barnewell added that abrdn is also speaking to investors to further understand whether a structured comingled fund for continental Europe will be plausible.
The Edinburgh-based business launched its second UK-focused real estate debt fund, abrdn CRED II, in March 2022 – raising £205 million from public and corporate pension schemes in the UK. The company is aiming to raise up to £1 billion in equity for the vehicle.
Barnewell, said he expects the firm to hold a second close on the UK vehicle in the summer.