Cheyne plans Nordic lending push following Helsinki loan

London-headquartered manager Cheyne Capital, which closed a €62 million loan in Finland in February, is aiming to lend as much as €800 million per year in the Nordic real estate markets as it expands its reach in continental Europe.

Cheyne, which has carried out most of its lending to date in the UK and France, entered the Nordics in 2021, with two transactions in Sweden. However, activity was hampered by the covid-19 pandemic and Russia’s invasion of Ukraine.

In February, the manager completed its third Nordic loan – a senior facility to finance the redevelopment of an historic building in the Kruununhaka district of Helsinki into a five-star hotel. The loan was provided to Finnish real estate manager Samla Capital to part-fund the creation of the Hotel Maria which is due to reopen in December.

Looking forward, the firm sees the scope to deploy more capital in a regional lending market that has been traditionally dominated by domestic bank lenders.

Speaking to Real Estate Capital Europe, Daniel Schuldes, co-head of European real estate at Cheyne, said the firm sees potential to invest between €600 million and €800 million in the Nordics in any given year. He added that activity in the region had been weakened because of the pandemic, and by the fact Finland shares a border with Russia amid war in Ukraine. However, he said overall the economic and legal environment in countries including Finland is attractive.

Cheyne’s real estate business, which has €4.7 billion of assets under management, will aim to provide construction loans and value-add financing across sectors in the Nordic markets, with a focus on the living sectors.

Schuldes explained that, because the firm tends to back large construction projects where value can be added through heavy refurbishment, the loan sizes will mainly exceed €50 million. He added the firm will also look at core-plus loans against newly opened assets that lack a trading history. Its strategy will target a loan-to-cost rate between 60 percent to 75 percent.

Schuldes said the firm will aim to partner with sponsors and contractors with significant experience and strong balance sheets. “A general rule, when we do construction lending, is we are asking for a fixed price construction contract to be in place with a reliable and well-capitalised contractor,” he said. “Having a high-quality asset in an attractive location for its use class, and a professional sponsor behind the asset are critical.”

Schuldes explained inflation and rising interest rates has made it difficult to price loans in recent months. “Pretty much everyone [lenders] has reacted by effectively increasing rates and lowering the leverage that is on offer. The banks have done so particularly strongly,” he said.

“This presents both an opportunity and a challenge. The question is whether to step into that void left by the banks, or to hold off. We are trying to walk this line at the moment.”

Schuldes added that competition to lend in the Nordics will be largely from banks and lenders and Cheyne will look to procure larger deals, which other lenders in the region cannot compete for.

“It is not easy to compete against local players, who have very longstanding relationships, but where we are trying to compete is on the larger projects, which have higher barriers to entry. Local players may not have the capital, and it might take them a long time to form a syndicate, which comes with lots of complication. We are able to offer transaction security in that sense,” he said.