Founders of property debt arm leave as mezzanine raising proves tough
Keith Davidson and James Tarry have left Cordea Savills, eight months after they were recruited to set up a property debt business there.
Tarry has joined Aviva Investors as debt fund manager, reporting to Ben Stirling, to work on Aviva’s proposed senior debt fund.
Tarry’s and Davidson’s role at Cordea Savills was to find mezzanine deals, advise the Cordea Savills Prime London Residential Development Fund on debt and equity investments, and create other investment vehicles providing debt.
Cordea chief executive officer Justin O’Connor said the pair had decided to leave “separately, to do other things”. He added: “We still believe in debt and are looking at a product investing across the capital stack in senior and junior debt with blended 8-10% returns.
“Kiran Patel, who joined us recently as chief investment officer, is looking at debt now.” O’Connor said mezzanine deals with mid-teen returns had proved harder to source than the firm envisaged a year ago.
“I think this is a lot harder than people thought,” he said. “There is a great demand for debt, but like everything at the moment, launching products and raising capital is hard.”
The Prime London Residential Development Fund announced its first two deals last week: two adjacent development sites in Chelsea, in partnership with a private family office co-investor and Tenhurst, the company of developer John Hunter.
The sites are former girls school the Sloane and Kings Chapel, on Hortensia Road, SW10. The total acquisition price is around £40m and Cordea’s fund will provide £25m of equity development finance rather than debt.
The prime London fund has raised £40m of equity so far from wealthy clients of two international banks and Cordea Savills is still fund raising. O’Connor said the investors were mainly from Asia, with some from Europe. “We have a number who are coming back because completing the first deals has made it more interesting,” he added.