Investec Real Estate, the property financing business of UK- and South Africa-headquartered bank Investec, has partnered with an institutional investor to provide £170 million (€203 million) of finance for a London build-to-rent residential scheme, Real Estate Capital Europe can reveal.
The loan is the largest club deal to be arranged by the bank in the real estate sector since 2015, when it arranged a £200 million loan to finance and comes as it is aiming to grow its presence in the UK’s syndicated property lending market.
The facility – which is also Investec’s largest UK BTR loan to date – was provided to a joint venture led by residential property owner Greystar to refinance the Sailmakers, a 327-unit apartment building in London’s Canary Wharf district.
Its financing partner in the deal – identified only as a global institutional investor – provided £85 million of the total financing volume. Investec, which underwrote the remainder of the loan, has sold down part of its share in the secondary market and will retain the remainder on balance sheet.
Investec has been active in the mid-market of the UK real estate financing market, with a focus on residential assets, for both sale and rent, purpose-built student accommodation, and light industrial and logistics. According to its website, it provides loans as small as £5 million, and as large as more than £100 million.
Mark Bladon, head of real estate at Investec, told Real Estate Capital Europe the Sailmakers financing demonstrates the bank’s ability to originate larger-ticket loans, with a view to structuring them as club deals or syndicated financings.
“One of the big focuses for our business in real estate is to grow our distribution capabilities,” he explained. “Real estate represents a large proportion of the bank’s lending book and so we don’t have unlimited capacity to keep growing that proportion. We have other teams – fund finance, aviation, corporate lending – that have successfully done a lot of syndicated lending.”
In the year to the end of March 2022, the business arranged around £180 million of off-balance sheet lending, of which its £85 million share of the Sailmakers loan was the largest component.
“It was a deal in which one of the JV partners, Greystar, was an existing client. We won the mandate in 2021 as the market was recovering from the pandemic and the asset was around 50 percent occupied, so it was not stabilised. We decided to bring in a day-one partner for 50 percent of the volume.
“It’s one of the largest loans we’ve ever done, and it showed our ability to play in that space, in which we usually see investment banks and big insurers lending.”
Investec is aiming to provide up to £1.2 billion of real estate finance in the 2022-23 financial year, up from around £1 billion in the year ending March 2022. Of that circa £1.2 billion, the bank is aiming to syndicate around £350 million of debt. Bladon explained Investec’s strategy is to leverage its established origination platform in the UK to partner with select counterparties, including institutional and non-institutional funders, insurers and sovereign wealth funds who have appetite for similar transactions.
“The ability to sell down debt will give us the ability to arrange larger financing deals than we have done previously, meaning we can support those big clients we have relationships with,” Bladon added.
Following the Sailmaker deal, Investec has arranged £595 million of debt in the UK BTR sector across seven schemes. The property, which features co-working space, a gym and a roof terrace, is typical of the purpose-built rental properties the bank has targeted through its lending.
“Given Investec’s size, we typically focus on more niche areas of the market or nascent sectors rather than the very dry, vanilla property lending like some of our counterparts,” Bladon said. “For example, that meant targeting BTR and PBSA before those sectors were as widely banked as they are now.
“However, BTR and PBSA are now viewed as defensive asset classes, so there is a lot of capital out there to fund them, meaning it is more difficult to be competitive.”
Its £1 billion of lending in the 12 months to the end of March 2022 exceed a £700 million target and was up from £430 million in the previous 12 months.
Bladon said increased lending was in part due to a “covid bounce”. “By that, I mean real estate is a people-centric business, and as soon as agents, bankers, and borrowers were able to, they rushed out to meet people, see sites, and do business. There was a lot of pent-up demand in an industry that likes to do deals.”