Two former property bankers are assembling a club of institutional investors to lend senior debt on large European property deals. Bell Capital Partners, a property finance boutique set up a year ago by former Merrill Lynch and Barclays Capital structured financiers Robert Bell and Robert Palache, has five anchor investors that will form the nucleus of a private placement platform by investing a minimum of £250m each. Savills and Freshfields Bruckhaus Deringer are advising on the capital raising and the structure of the platform, which BCP hopes will legally close in two months’ time with more than £1bn of capital. BCP hopes to expand the club eventually to about a dozen investors.
Bell said the investors will typically target large deals worth £200m-£500m or more, which is the part of the market where the lack of liquidity for borrowers is most acute. It is also the area where BCP’s investors can achieve margins on senior facilities of 300-400 basis points. The club will look at refinancing maturing loans as well as new deals. BCP estimates that an average €90bn of European property debt is set to mature every year for the next five years. “Borrowers are telling us that their only option to refinance a large loan is to pray they can collect enough banks to do it, but it is at best a nightmare and at worst an impossibility,” said Bell.
“We will organise one cheque to go to the borrower, and that satisfies a gaping hole in today’s market.” Bell said institutions such as Allianz, Axa, Aviva, Canada Life and Prudential M&G had previously invested in structured senior property debt via the capital markets, buying CMBS and other structured debt from big banks’ syndication desks. But since the credit crunch these banks no longer produce this kind of debt product.
Volumes of publicly issued or privately placed pfandbrief and other European covered bonds have also dramatically fallen since the financial crisis. BCP claims insurers and pension funds would like to invest €1bn-€2bn a year each in senior property debt, or about €25bn in total a year. “To originate deals they would have to create their own banks and none of them want to do that, as it is not their job; that’s our job,” Bell said.
Separately to the senior debt initiative, BCP also advises clients on subordinated debt, hybrid capital and equity co-investment. Late last year, BCP placed a quarter equity share in the 1.8m sq ft Lumiere building in Paris with a client for about €35m. Cambridge Place Investment Management sold the stake to BCP’s client, which became a co-investor with Tishman Speyer, Caisse de Dépôt and a Dutch pension fund. Tishman, advised by Morgan Stanley, led the equity syndicate and bought the building in early 2006 from Blackstone, advised by Freshfield.