Mayfair loan plays into BVK’s RE strategy

German pension fund Bayerische Versorgungskammer (BVK) has increased its exposure to the core London development market through a new loan originated by Deutsche Asset Management.

The £55 million (€60 million) facility is understood to have been provided though the €750 million real estate debt mandate awarded by BVK to Deutsche AM last November as part of a new separate account strategy which sees the pension fund invest in real estate through equity and debt.

The loan will finance the redevelopment of 22 Hanover Square, in London’s Mayfair district, into a five-star boutique hotel, plus luxury apartments and ground-floor retail, to be delivered by developer Clivedale.

Deutsche AM declined to provide further details of the financing, although Real Estate Capital understands the loan has a relatively short term. Deutsche AM’s entire European real estate debt business held €1.25 billion in assets under management as of July, when including loans written on behalf of BVK.

Prior to awarding the mandate to Deutsche AM, BVK had invested in one-off debt deals with several lending partners in the UK and US markets. The capital is structured as a fund and invests in stretched senior loans and subordinated loans in Europe and the US. Focused on large, high-quality assets, the fund’s blended target returns are in excess of 4 percent.

The prime Mayfair site is expected to benefit from the nearby construction of an underground station at Bond Street for London’s Crossrail network. Other recent deals written by Deutsche AM for the mandate include a May loan, alongside pbb Deutsche Pfandbriefbank, to provide £69 million to refinance a mixed-use block on London’s Savile Row for property investor Aerium. Deutsche AM provided a £25 million mezzanine facility on behalf of BVK.

BVK, which is Germany’s largest public pension fund, has significantly increased its exposure to real estate in the last year. In December 2016, Hines, acting for BVK, bought the Liffey Valley shopping mall near Dublin in a deal reported to value the asset at €630 million.

In July, Real Estate Capital’s sister title, PERE, reported that the €69 billion pension fund had awarded a €250 million separate account mandate to Universal-Investment, the Frankfurt-based investment manager, and GPEP, the Frankfurt-based asset manager, to invest in the retail sector. The separate account, BVK-Deutschland I-Immobilienfonds, is expected to be used to invest in supermarkets and retail centres throughout Germany, across the full range of risk strategies.

In October 2016, the pension fund awarded Universal-Investment a €3.6 billion mandate to invest in European and Asian residential and office assets. Earlier in 2016, it inked three further large mandates worth a combined €2.1 billion. In July, the firm handed Patrizia Immobilien, the Augsburg, Germany-based real estate investment manager, a €400 million cheque to create a pan-European residential property portfolio. Weeks earlier, the German pension fund had struck a deal with Finnish private equity fund CapMan to invest €400 million in Nordic residential markets.

In January 2016, BVK teamed up with the European arm of Houston-based fund manager Hines in launching a €1.3 billion separate account programme to invest in European high-street retail. In March this year, Hines made its eighth and ninth acquisitions on behalf of the BVK mandate. So far assets have been acquired in Denmark, Spain, Ireland, France and the UK.