Debt funds: TIAA Henderson Real Estate prepares for revamped whole loan fund debut

TIAA Henderson Real Estate has beefed up its European debt investment team ahead of unveiling its maiden debt fund in the next few weeks. The new fund will offer borrowers whole loans on UK property with loan-to-value ratios up to 75%. To generate 7% returns, THRE’s debt team will have the option to syndicate the super-senior portion of the loans it makes, typically the first 35% LTV tranche.

Christian Janssen, THRE’s head of real estate debt, has recruited Shawn Kaufman from Royal Bank of Scotland and Christoph Wagner from BlackRock. Janssen’s team will be responsible for both the new fund, for which THRE is about to start fund-raising, and for the UK senior debt investing mandate for TIAA-CREF, after Catherine Webster, former manager of that mandate, resigned.

The debt fund’s strategy has been revised since Janssen joined last year and after the original head of debt at Henderson Global Investors, John Feeney, left to go to Lloyds. The change of strategy also follows the completion of Henderson Real Estate’s merger with TIAA-CREF in April. The previous strategy had been to launch two debt funds, one to target senior loans only and the other a “high income” fund that would invest in defensive, subordinated loans.

The new fund strategy will not conflict with the TIAA-CREF mandate, which is for good-quality, low-risk senior debt and the two clients will not invest in the same deals. TIAA-CREF is one of the leading non-bank investors in property debt in the US but has yet to make any UK investments. Kaufman, who has already started working at THRE, was responsible for syndicating debt at RBS.

Wagner has originating experience in the UK and Germany; he previously worked at Barclays with Janssen. Webster is joining Lone Star’s loan
servicing arm, Hudson Advisors, which is expanding after winning a string of large non-performing loan portfolios, including part of Commerzbank’s Spanish ‘Project Octopus’ (see below).

US CMBS: Colony issue joins wave of single-family CMBS deals

Colony American Homes’ second single family rental securitisation, the $558.5m Colony American Homes 2014-2, is on the market — the fifth such offering in the rapidly growing asset class. Colony issued a $513.6m offering in March and Colony American Homes 2014-2 marks the fifth such offering ever. The non-recourse loan is secured by the borrower’s lien on 3,727, three-plus bedroom, single-family homes across seven states, with a two-year term and three 12-month extension options. Kroll and Morningstar are the rating agencies for the CMBS, awarding AAA
ratings to a $291.18m (36.5%) tranche.

Euro bonds: Hammerson issues bonds with all-time low coupon

Hammerson has issued a €500m, fixed rate public bond with the lowest ever UK property company coupon, at 2%. Priced at 90 basis points over the mid swap rate, the eight-year bond was more than five times oversubscribed. The new finance replaces slightly more expensive
existing debt and extends the duration of Hammerson’s liabilities. The retail REIT has a large retail portfolio in France. Its nine French shopping centres were valued at £1.7bn at the end of last year.

US debt market: Outstanding US real estate debt up $11bn over Q1

Increased lending by banks, insurance companies and REITs boosted total debt outstanding on US commercial and multi-family property by $11bn, or 0.4% to $2.56trn in Q1 2014, according to the Mortgage Bankers’ Association. “Outstanding commercial and multifamily
mortgage debt continued to expand in the first quarter, hitting another new high,” said Jamie Woodwell, MBA’s vice-president of commercial real estate research. “Banks led the charge, followed by life insurers and REITs, while the CMBS market reverted to a net decline in the balance of outstanding mortgages.“ Lending on apartment properties continued to grow more rapidly than other property types, by $8.7bn, or 1%,
to $913bn in Q1 2014. Commercial banks still hold the largest share: 36%.

NPL sales: JP Morgan and Lone Star land Spanish Octopus

JPMorgan and Lone Star won Commerzbank’s former Eurohypo Spanish commercial property loan book, with a nominal value of €4.4bn.
In the ‘Project Octopus’ sale, Lone Star acquired the non-performing loans for €1.4bn with finance from JPMorgan and took on some of the bank’s employees. JPMorgan bought the performing book at a price in the high 80 cents in the euro. The German bank also sold €700m of
Japanese loans to PAG fund Secured Capital REP V and Pacific Alliance Special Situations funds.

German debt deals: Pfandbriefbank refinances THRE ’s Berlin outlet mall

Deutsche Pfandbriefbank provided €67m of refinancing for Designer Outlet Berlin, owned by TIAA Henderson Real Estate’s €1.5bn European Outlet Mall Fund, replacing original lenders KBC and WestImmo. The five-year senior loan reflects an all-in cost of around 2.3% and a margin
of around 160bps over three-month Euribor. The fund, which owns eight outlet malls and has an indirect stake in three more in the UK, was recently extended by 10 years. Colin Throssell, head of treasury at TIAA Henderson Real Estate, said: “Our ability to lock-in historically low finance costs for five years will aid the fund in delivering strong returns to its investors.”

THRE

Loan documentation: LMA issues template for inter-creditor agreements

The Loan Market Association published the first standardised inter-creditor documentation for the rising number of loans provided with mezzanine as well as senior finance. The LMA produces documentation for real estate and other loan market sectors to encourage liquidity and efficiency in both the primary and secondary markets. It said the REF Inter-creditor document would “enable market participants to
concentrate on the key commercial drivers and structural nuances that form the basis of their transactions”. Nick Kilbey, vice-president in European real estate debt finance at Pramerica, which raised €820m for its fourth junior debt fund last year, said: “The LMA document will enable people to take a step back and think about what their role is.”

Debt advisors: Boutique Brookland sells stake to hedge fund Omni

Nassar Hussain’s Brookland Partners sold a stake in the boutique debt adviser to hedge fund Omni Partners, which manages $650m of alterative assets. “Joining forces with Omni Partners allows us to benefit from their institutional investment experience across a variety of credit funds, as well as providing additional infrastructure and operational support we wouldn’t otherwise have,” said Brookland partner Gareck Wilson. Hussain set up Brookland in 2009 as a real estate investment bank, focusing on CMBS restructuring. The market has evolved since then, with many of the large work-outs now completed. Last July it established a new loan advisory division, called Brookland Financial, to source debt for borrowers from lenders.

Debt mandate: ICG -Longbow targets first buy for institutional club

ICG-Longbow is close to making its first investment for a new £400m UK senior debt mandate that pulls together four institutional investors.
The investor club will provide senior debt at loan-to-value ratios up to 65% and has until Q2 next year to fully invest, said Trevor Homes, who runs the senior debt side of ICG-Longbow’s business. The four investors include BBC pension fund, which made the largest commitment, of £150m, two other UK pension funds and one other investor. Each will participate when a deal is closed and BBC will take a 37.5% stake in every loan. Longbow will look to finance assets in the office, retail and industrial sectors. It will also consider student housing and potentially hotels. “We prefer multi-let assets and portfolios and have a UK-wide strategy,” Homes said. Lot sizes range from £10m to £80m, with five to 10-year durations.

 

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