UK-based private credit firm Arrow Global has appointed Toni McDermott as its chief investment officer of credit and direct lending. While McDermott’s role will involve overseeing Arrow’s real estate debt investments, a particular focus will be to lead an expansion of the firm’s European property bridge lending activities.
“We see bridging growing in importance because of the need for flexible funds to finance refurbishment projects to address the energy inefficient, aging housing stock across the UK and Europe,” McDermott told Real Estate Capital Europe.
“In recent years, it has become less capital efficient for traditional banks to offer bridge loans and harder for them to compete from an operational perspective with the more flexible funding solutions which Arrow provides,” she added.
Arrow has previously provided bridge lending in the UK through London-based residential development lender Maslow Capital, which it fully acquired last month. Arrow is now looking to use Maslow’s experience in the UK as a template to expand its strategy into its other core markets – Italy, Portugal, Ireland and the Netherlands.
Arrow plans to originate senior bridging loans, through various pools of capital including its €2.75 billion Arrow Credit Opportunities II fund. Loans will range between €300,000 and €10 million. As well as loans for residential projects, Arrow will also provide bridge financing for office, hospitality, industrial, and healthcare properties, as well as development land. The loan terms will be between three to 36 months.
“We are looking to provide senior secured real estate funding for professional property investors for projects where reliability, speed and flexibility of funding is the priority such as refurbishment and conversion projects or auction purchases,” McDermott said.
McDermott, who joined Arrow from US bank Morgan Stanley, where she was managing director of loan solutions and securitisation, will be responsible for all real estate debt investments for the business.
Earlier this month, the firm launched Amsterdam-based firm Mica Real Estate to manage its property credit and equity exposure in the Netherlands. Mica will be led by Mark Debets, former director at Hudson Advisors, a subsidiary of Dallas manager Lone Star Funds, and Timo van den Noort, formerly vice-president at New York private equity firm Fortress Investment Group.
Market participants have told REC Europe there is a significant need for bridge financing across Europe, in part because developers are unable to sell their completed schemes for their targeted prices due to valuation uncertainty. Instead, sponsors are opting to refinance to exit in a more stable market.
Managers providing this type of finance include Essen-based alternative lender Aukera Real Estate and Boston-based investment management firm Bain Capital, which are both aiming to provide bridge-to-exit financing – a type of finance the firms describe as longer-term than the conventional 18-month bridge loan, with terms up to three years.