LaSalle Investment Management has written its first loan in the Spanish market, financing the purchase of a student housing portfolio for sector specialist GSA.
The €100 million-plus loan is the second to be provided from the firm’s latest mezzanine and whole loan debt fund, LaSalle Real Estate Debt Strategies III (LREDS III), which is targeting an increased volume of lending in continental European markets.
The whole loan finances both standing assets and properties under development. GSA, which owns a student accommodation portfolio across Asia and Europe, bought the 914-bed portfolio, plus 1,320 beds under development, from funds managed by Oaktree Capital Management.
The portfolio comprises three operational buildings in central Madrid, plus a fourth asset due to complete in September, also in the Spanish capital. GSA has also bought two schemes under construction in Barcelona, which will be completed in 2019. In addition to the properties, GSA has bought the operating business and the Nexo Residencias brand.
GSA already operates two European student housing brands; The Student Housing Company and Uninest Student Residences. The firm has plans to invest €500 million in Spanish student accommodation over the next five years.
Alongside the debt deal, equity was provided by GSA’s European Global Student Accommodation Fund.
LaSalle has raised £334 million for LREDS III, with a final close in the region of £750 million targeted for Q3.
In a recent interview with Real Estate Capital, Amy Aznar, head of debt investments and special situations at LaSalle, said that IRR on mezzanine lending currently stands at between 7 and 9 percent, from 12 to 14 percent earlier in the cycle, around 2010. “It has now settled at more sustainable levels,” she said.
The LREDS III fund is likely to be deployed in an increasing number of whole loans, so LaSalle can act as a single point of contact for borrowers, with an increasing focus on continental Europe, Aznar said. Clients are increasingly looking to continental Europe for deals due to reduced investment volumes in the UK market post-referendum, she added.
LaSalle has completed debt deals in continental Europe previously, including a 2014 investment in the mezzanine tranche of the financing of Paris landmark Coeur Défense, as well as a whole loan for Blackstone and ECE’s Rhein-Ruhr-Zentrum shopping centre in Germany in 2014. It also completed a 2012 mezzanine financing of a retail parade in Cannes, France, for Thor Equities. However, most of the firm’s lending has been concentrated in the UK market since it launched its debt business in 2010.