Ready Capital, the New York-headquartered commercial mortgage real estate investment trust, is targeting the European property lending market through a new joint venture agreement with London-based alternative lender Starz Real Estate.
Through the agreement, Ready is providing capital for Starz to originate €300 million of real estate loans in the European market in the next two years. The mandate is the latest example of a US-headquartered capital manager seeking exposure to the European property financing space.
Ready Capital chief executive Thomas Capasse said the partnership with Starz is part of its commitment to expand the mortgage REIT’s commercial real estate business internationally.
“With a history of sourcing high-quality loans from strong sponsors, the team at Starz has an investment philosophy that aligns well with the credit foundation of Ready Capital’s lending strategies, plus they share our hands-on approach to loan servicing and asset management,” he said.
Ready Capital, which launched in 2011, describes itself as a non-bank real estate and small business lender. The publicly traded mortgage REIT, managed by investment adviser Waterfall Asset Management, has provided more than $14 billion of capital across the US, in loans of up to $75 million for multifamily residential and commercial real estate, with value-add bridge loans and fixed-rate financings for stabilised assets.
Through the joint venture, Starz will focus on deploying commercial real estate bridge and term loans of between €10 million and €40 million, with the UK, Benelux, German-speaking markets, Italy and Portugal in its sights. Loans of up to 75 percent will be made available to borrowers for assets in sectors including offices, residential, student housing, logistics, self-storage and “selective” retail and hotel opportunities. The joint venture will also provide construction finance.
David Arzi, chief executive of Starz, said the partnership with Ready will “significantly expand” his company’s capability to satisfy demand for mid-market real estate finance in European markets.
“We are working in a challenging yet exciting landscape in the wake of the pandemic, with new opportunities as assets change hands or need repurposing to suit new demands,” Arzi commented. “We are pleased to have an institutional investor of this calibre backing us.”
Arzi, the former head of Marathon Asset Management’s US and European property businesses, launched Starz in June 2018 with the backing of Sightway Capital, the private equity arm of New York-headquartered financial services company Two Sigma.
In February, Starz secured funding from a Middle Eastern sovereign wealth fund, with which it aims to originate up to €900 million in property loans within the €15 million to €75 million range. The mandate was structured as a fund – Starz Zenith Capital. Speaking to Real Estate Capital Europe at the time, Arzi said returns on offer to investors in the European real estate credit space were not too dissimilar to real estate equity.
He added that the smaller scale of Europe’s real estate lending industry, compared with the US, is a source of opportunity for investors. “The credit markets in the states are just a lot larger, especially the public markets. There’s a lot more liquidity. I think Europe still has some levels of inefficiencies, which enables you to get some extra yield that is probably hard to find in the US market.”
The latest transaction for Starz Zenith Capital was a €68.5 million senior facility to manager Union Street Investments for a multi-office investment platform in the Netherlands.