UK real estate investor Grosvenor, a firm based on the Duke of Westminster’s land holdings, is looking to diversify its lending in the UK – following its debut in the debt market in April – as it seeks to capitalise on refinancing opportunities.
Speaking to Real Estate Capital Europe, Rachel Dickie, executive director of investment at Grosvenor, said the firm is in the process of setting up a joint venture with a global investment manager – which already operates an existing lending platform – to invest in the real estate debt space in the UK. The 50/50 split joint venture will launch with £100 million (€116 million), with the two parties providing €50 million each.
Dickie explained that the firm will replicate its equity strategy by allocating capital to both standing and development assets in locations including Manchester, Bristol and Birmingham. It expects much of the capital to be allocated to residential assets and a minority chunk to explore commercial real estate opportunities amid refinancing shortfall, she added.
Grosvenor launched a residential development debt strategy, with £120 million seed capital, in April.
Its first loan was a senior loan facility of £33 million to Frankfurt-based investment management firm DWS Group to support the delivery of 316 homes to rent in Bath, UK.
Led by the investment team in its UK property business, it finances projects across a broad range of residential tenures in order to diversify its £800 million regional investment portfolio.
But Dickie said its first debt platform is too strict to fully diversify its debt allocation.
“As we have got into debt, we have seen more opportunities that don’t necessarily fit the quite strict criteria we’ve set ourselves for the first tranche of capital,” she said, adding there is opportunity to invest in standing assets across real estate, instead of being limited to residential development projects.
Dickie explained its main aim with the JV is to provide loans to help sponsors retrofit assets in compliance with current sustainability credentials.
The firm is being advised by real estate consultant CBRE and is close to finalising the programme.
Grosvenor also operates a residential development finance strategy in the US called Structured Development Finance which focuses on providing finance for merchant development in residential and multifamily sectors in Canada and the US.
This division of the business has raised around $1 billion for its True North fund series, a limited partnership between Grosvenor, Vancouver assets manager Nicola Wealth and Los Angeles-based private equity investment firm Kingswood Capital.
In July 2021, the firm held a final close on its latest vehicle True North III raising $300 million.