Blackstone Mortgage Trust makes move into continental Europe

Blackstone Mortgage Trust has made its entry into continental Europe, issuing its first loan there, on an office portfolio in the Netherlands.

Blackstone’s US REIT provided a €28m senior loan for joint venture partners Angelo, Gordon and Valad Europe, secured on the Equinox portfolio of nine Dutch office buildings. In May the investors paid €37m for the 51,000 sq m of assets which are predominantly in the Randstad area and are let to 37 occupiers with a weighted average lease term of three years.

The assets were collateral for a non-performing loan originally made by JPMorgan to Deutsche Bank’s DB Real Estate Opportunities IB fund  and securitised in the European Property Capital 3 (EPC)  CMBS. The loan failed to repay in August 2010 and went into special servicing soon afterwards.

The mortgage REIT was listed on the New York Stock Exchange in May 2013 and has been making loans in the UK, particularly in London, but this is its first loan on the continent. UK loans represent 14.6% of its total $3.5bn floating-rate loan portfolio according to its second quarter results.

The senior lender’s largest deal this year was financing part of one the UK’s mega loan trades. The mortgage REIT provided $338m (£204.5m) of loan-on-loan finance for Sankaty Advisors’ and Canyon Capital’s March acquisition of an estimated £400m face value loan out of IBRC’s Project Rock portfolio (most of which traded to Lone Star).

The five-year senior debt reflected a 57% LTV and a cash coupon of LIBOR plus 4%. The UK-wide hotel portfolio includes The Oxford Belfry, The Midland in Manchester, The Queens in Leeds, Crewe Hall in Cheshire, and The Westerwood Hotel & Golf Resort near Glasgow.

Blackstone Mortgage Trust, which has a weighted average LTV of 63% across its total $3.51bn loan book, is a separate part of the private equity firm’s debt business from Blackstone Real Estate Debt Strategies’ debt funds. Its BREDS II fund takes part in higher yielding deals.

Between them, BREDS and Blackstone Mortgage REIT have originated $1bn of loans in Europe this year with volumes skewed slightly more towards the REIT. BREDS is already active via its funds in core Western European markets including the UK, France and Germany and both sides of the business will delve into Continental Europe to a greater extent “as a by-product of what equity investors are doing”, said BREDS’s head of Europe, Rob Harper.

Speaking to Real Estate Capital as part of a forthcoming October issue special feature on ‘The new lending paradigm in Europe’, Harper said BREDS continues to lend in the UK even though it is competitive, but anticipates spending more time on the Continent as deal flow rejuvenates.