Not if but Venn for Norwegian client’s property debt debut


A £500m Norwegian mandate has given Venn Partners’ new property debt offshoot plenty of firepower, which is backed up by an experienced real estate finance team, reports Lauren Parr


New whole property loan business Venn Finance aims to deploy £300m-350m of Norwegian money this year, with the UK and Germany its primary targets.

Capital to lend against European commercial property is coming from many directions and in this case, it’s a £500m mandate from Norwegian industrial conglomerate Siem Industries Group.

Venn has lined up two deals already: a £50m acquisition loan secured against London residential, and a junior loan secured against the French hotels sector.

Once Venn has built a track record in originating and structuring debt, as well as managing the loans, it plans to seek further co-investment mandates.

“Senior lending is a volume business, so we will need to grow the balance sheet,” says co-founder and partner Paul House. “As such, we will bring other investors into real estate debt.”

House was headhunted from Citigroup in January to lead the venture for asset- backed securities adviser Venn Partners. His six-strong team includes former Citi colleague Beatrice Dupont, who was head of origination at the bank; a previous lead underwriter, Jon Taylor; Richard Green, who is responsible for Venn’s VeRA in-house risk analytics model; and two analysts.

Venn Partners is Jonathan Clayton’s enterprise, a credit specialist that advises financial institutions on structured finance and derivatives. Clayton, who works closely with House in London as a co-partner, set up Venn Partners in 2009 with Gary McKenzie-Smith and the group now advises on £3bn of assets, including £300m of CMBS.

Siem is cornerstone investor

Venn's [l-r] Clayton, House and Dupont are targeting whole loans in the UK and Germany
Venn’s [l-r] Clayton, House and Dupont are targeting whole loans in the UK and Germany
Venn Partners is part-owned by Siem, which has several private shipping interests, as well as a stake in a public oil and gas company. As a cornerstone investor in Venn Finance, it owns part of that business. House was recruited for his real estate financing, structuring and distribution skills.

As head of Citigroup’s real estate investment bank in Europe since 2010, and before that responsible for syndication and co-head of the large loan group, House knows investors and has run several finance teams.

House reckons the flow of property refinancings and financings has so far been fairly slow compared with the mountain of maturities ahead in the next two years. “We’re now dealing with second and third loan extensions, so there is less rationale for extension,” he says.

“A lot of private equity money is looking to buy assets, as are recapitalised public companies and real estate funds, but the deal volume is low, as most sellers have been reluctant to sell at a loss.”

Venn believes that with banks continuing to unwind legacy loans, and around £140bn of debt in need of refinancing by the end of 2016, nimble new lenders that have capital, a platform and loan origination experience have a huge opportunity to cherry-pick loans.

A wide range of capital sources for investing in real estate debt are popping up, from insurance companies to funds, as well as other investors such as Siem, which have not invested in real estate before.

“The money is coming in because of a perception of opportunity,” says House.

“Credit spreads in commercial real estate are relatively healthy compared with other fixed income. The industry has been through a downturn and has seen a repricing of assets. Deal activity is expected to increase in the near future. Over the course of this year it will pick up.”

House sees UK money flowing into Germany: “A lot of London-based private equity funds do pan-European deals and, like us, have contacts in Germany. They’re interested in multi-family housing.” Venn is focusing on lending in the six largest western German conurbations.

House says in the UK, loans on the scale of the £250m needed for Plantation Place in the City would be “a bit large for us,” but it would consider such deals with a partner.

Alternative debt provider

Venn will pursue selected mezzanine deals mainly as part of its whole loan strategy. It sees itself as an alternative debt provider to the commercial real estate market, competing with bank and alternative debt providers such as Starwood Capital, M&G and Macquarie.

“Our remit is senior whole loans; we’re willing to take additional asset-level risk or high loan amounts, but we’re not centred on mezzanine,” House says. “We need to compete on flexibility and speed and want to bring in alternative investors as we finance ourselves.”

Its typical whole loan size would be around £50m-100m, at a 70-75% loan-to- value ratio and an all-in cost of 5-7%. Venn is looking to finance office, retail, industrial, residential and hotel property, including secondary London assets, but not develop- ments, data centres, pubs or healthcare.

Venn Finance also has the facility to manage loans, access to Venn Partners’ credit analytics and risk tool, and the support of Venn Partners’ structuring team, making it a potentially powerful player in the crowded market of new alternative real estate lenders.