Hermes Investment Management has appointed Vincent Nobel, formerly at M&G Investments, as its new head of real estate debt.
He replaces Marcus Palmer, who joined the company in the summer of 2013 before leaving a year later to join Royal Bank of Canada as managing director and head of committed lending.
The move underlines Hermes’ continued ambition to be involved in senior lending in the UK, despite it becoming increasingly difficult to achieve strong returns over the past year due to heightened competition. Hermes hasn’t yet made a debt investment.
The investment manager has a £400m cornerstone commitment, believed to be from in-house client the BT pension fund, for the Hermes Real Estate Senior Debt Fund.
Ben Sanderson, director of international investment and debt at Hermes, said: “Clearly pricing for senior debt has changed quite significantly, but we still see opportunities for a lower risk debt investment strategy. It is still attractive versus other single A/BBB risk-equivalent rated paper.
“We may focus more on BBB equivalent risk. The characteristics in debt might be loan to values nearer 70% than 65% and income cover of 1.75 times instead of 2.25-2.5 times. There are still pockets of value, in regional markets for example, in more core-plus type lending”.
Sanderson said that Hermes had put further fund-raising for the senior debt fund on hold after Palmer resigned, but had interest from an international investor “who is attracted to Hermes” as a debt separate account mandate. “It’s a really fruitful discussion and we hope to close that by early next year” he said. “It is a different strategy to the fund”.
At M&G Investments Nobel worked in the senior real estate debt team for three years. Before then, he worked in the specialist debt team at Barclays.
Chris Taylor, chief executive of Hermes Real Estate, said: “Real estate debt is an important business growth area for Hermes Real Estate and presents attractive long-term opportunities for investors.
“Vincent’s market-leading experience and expertise in real estate debt will help us grow our business in this area and maintain the momentum since we launched the Hermes Real Estate Senior Debt Fund. I remain confident that we will secure a diversified portfolio of high-quality loans over the next 12 to 18 months, as we look to this space for the long term.”
Nobel added: “The senior debt fund is in a good position to select strong transaction opportunities with good return characteristics. The risk-adjusted returns available on senior debt remain attractive to a range of investors, and there are a number of exciting areas to develop in the debt space over the medium term.”
When it was launched last year, the target for the Hermes Real Estate Senior Debt Fund was margins of 250-350 bps. It is looking to issue loans of between £30m and £100m.