LaSalle junior debt fund lands £150m and AXA fund an additional €180m
Fund managers LaSalle Investment Management and AXA Real Estate Investment Managers have raised £300m for investing in debt. LaSalle has secured £150m for a junior debt fund while AXA has attracted an extra €180m for its Commercial Real Estate Senior I pan-European debt fund.
LaSalle’s fund will provide up to £75m loans at 60-75% loan-to value ratios, targeting income producing properties in the UK. LaSalle already runs a special situations fund that invests in subordinated debt. The new fund seeks standard junior debt returns on core properties, lower in the capital structure than special situations.
“There isn’t a set target return; we’re pricing each investment on the underlying real estate’s risk level as well as location,” said Michael Zerda, a director in LaSalle’s special situations team.“But for the best-quality assets with the strongest property fundamentals we can’t be high single digits, so it would compete with some junior loan funds.”
LaSalle is understood to be working on behalf of one of its existing clients and will invest the money in 12 to 18 months. Isabelle Scemama, manager of the AXA fund, said CRE Senior I raised the additional capital from European, mostly French, insurers, some of which had already invested.
This takes the equity to €530m at second close: the manager raised €350m in January. A final close is expected by summer. Zerda said LaSalle’s closed-ended fund differs from the junior debt fund Schroders and Cairn Capital are working on with Eurohypo “in that we are not taking up a single senior lender; we’re working with a number of banks to present combined whole-loan packages and are speaking directly to borrowers that wish to top up their existing financing”.
Schroders and Cairn Capital hope to hold a first close by the end of Q2. LaSalle said senior banks are quoting debt terms at the 55-65% LTV level, with spreads of around 180-250bps. It said the cost of senior debt combined with junior debt or mezzanine finance up to 70-85% is accretive to equity.