Hotel deal takes LaSalle residential fund into new sector

LaSalle Investment Management’s £440m UK LaSalle Residential Finance (LRF) fund has expanded its mandate into hotels and completed its first deal in the sector, Real Estate Capital can reveal.

The broader remit will allow it greater flexibility to compete for deals in the slowly reawakening UK development finance market. The fund previously focused on only London residential and UK-wide student accommodation development.

It has loaned Melford Capital Partners £50m to finance the redevelopment of the University Arms Hotel in Cambridge (pictured). Melford has consent for a comprehensive refurbishment to make it into a four star hotel and expand it from 119 to 192 rooms.

The redevelopment is expected to take around two and a half to three years and the term of the loan covers construction plus a stabilisation period. The fund generally provides facilities at loan-to-cost ratios of up to 75%. The redevelopment has been designed by classical architect John Simpson.

Amy Aznar, head of debt investments and special situations at LaSalle said: “We continue to back high-quality sponsors and developments throughout the UK in student housing and hotels, as well as further residential projects within the M25. We also continue to focus on our wider lending activities providing mezzanine and whole loans in western Europe.”

The fund has also recently completed a £25m loan for a 60-unit residential development in Zone 2, south London.

The loans are the sixth and seventh made by the fund, which was launched in May last year with an initial £238m of capital, the largest investor being Dutch pension fund APG. A year later the fund almost doubled in size to £440m with additional investment from APG.

LRF completed its first and largest deal in June last year, loaning £100m to Urbanest for its development of 199 Westminster Bridge Road on London’s South Bank into a 1,100 bed, 19-storey student accommodation scheme and a 65,000 sq ft private school. In June this year it agreed an £89m facility with a joint venture between United House Development and Design Group to develop 355 residential units and 120,000 sq ft of commercial space at City North, next to Finsbury Park underground station in the capital.

The fund is the one of two debt funds that LaSalle is actively investing, the other being the £600m LaSalle Real Estate Debt Strategies II which invests in whole and mezzanine loans in the UK, Germany and western Europe.