CIM Group is expanding its $10 billion US commercial real estate credit platform to Europe.
The European Real Estate Debt Solutions business builds on the firm’s existing US debt platform, through which the firm originated more than $3.8 billion of commercial real estate loans last year, Richard Ressler, co-founder and principal, told Real Estate Capital USA.
CIM Group’s initial focus in the region will primarily be senior secured loans of £75 million ($91 million; €85 million) and £200 million on transitional assets, with longer-term plans to expand its focus to core mezzanine loans and ground-up development financing. CIM will finance the activity via existing fund mandates and is looking at markets that include the UK, the Netherlands, Germany and Spain.
The firm opened an office in London in 2021 and soon acquired Cathedral Square, a three-building office campus in Guildford, England as part of a value-added strategy targeting well-located office, residential, retail and logistics properties. CIM Group is now working to expand its credit team in the region, which will have additional support from roughly 30 US-based credit specialists.
Ressler, who started his career as a lender in 1984, said there are many reasons why CIM Group is making the move now. When looking at new markets, the firm tends to follow its real estate equity business.
“We follow our real estate business, because that gives us a competitive edge in understanding the markets,” Ressler said. “On a risk-reward basis, lending is now as good of a business as I have seen it be in my career. Spreads are widening, quality of loans is improving and the base rate is up. If you’re a relatively low leverage lender or lending with equity capital, this is pretty much halcyon days.”
This is particularly true when the firm overlays this opportunity set with the regulatory landscape for banks.
“As we looked at the market and what was happening at banks and their approach to lending in the UK and some of the European markets, we thought the opportunity set was similar to what we were seeing in the US. As lenders, we rely on analysis and operational expertise, so we tend to be a little slower in terms of moving into new geographies compared to other groups. While it may take time for us to do something in a new region, we are well-prepared for when we do it. We think the US lending space is very attractive right now, and we see a lot of similarities to the opportunities across Europe.”
CIM Group will follow a strategy similar to what it does it the US in which it works as a partner for banks. “We try and be, as often as we can, an extension of our partner banks. For example, if they have a high-quality balance sheet transaction, but for regulatory or capital reasons, they want to limit their hold size, they can work with us as a friendly lender that is not looking to take deposits, to help fill the hole in the capital structure,” Ressler said.
The initial markets the firm has chosen are ones it has been studying for some time.
“These countries we are looking at have excellent rule of law, the rules are lender-favourable and the business, ethics and practices are consistent and enforceable. With the banks pulling back and CIM Group having relationships with a lot of those lenders, we thought now was a particularly attractive time for us to expand our European operations, beyond real estate investing to lending as well,” Ressler said, noting the firm’s infrastructure business is active on a global level.
The firm sees ample opportunity to originate loans at a time when there is more than £150 billion of debt slated to mature by 2025 during a period in which capital from traditional bank sources is more difficult to source. Part of the firm’s strategy is working to bridge the well-document funding gap, Ressler noted.
“Flexible capital is always important and it is really critical if you’re a risk-adjusted, return-focused investor,” he said. “We are already leveraging our strong sponsor relationships as well as in-house expertise across development, leasing, property management and capital markets to underwrite business and development plans for high-quality assets in key European markets, and our growing European team is already evaluating opportunities to meet the demand for private debt capital in this region.”