Standard Life set to take on banks in senior debt territory

Asset manager targets shorter loan terms than other insurance lenders

Standard Life Investments is to go head to head with banks as it begins lending senior debt.

The global asset manager has announced that it will initially run a £250m segregated mandate on behalf of Standard Life Assurance.

Neil Odom-Haslett, who started as head of commercial real estate lending last month, said he was targeting short- term, three-to-seven-year loans, rather than the longer-term lending favoured by insurance groups that are lending from annuity funding.

Odom-Haslett: “We will step into the shoes of the banks, some of which are hamstrung”
Odom-Haslett: “We will
step into the shoes of the
banks, some of which are hamstrung”

“We will be opportunistic in the way we target borrowers, providing a quick turnaround and stepping into the shoes of the banks, some of which are hamstrung as to what they can do,” he said.

However, Standard Life will lend in clubs and consider syndications “if we like the deals” as well as making bilateral loans, typically £30m-£50m in size.

London-based Odom-Haslett will draw on the real estate finance team in Edinburgh, headed by Paolo Alonzi, and the insurer’s property analysts and valuers, and will recruit a handful of legal and transaction management staff in London.

David Paine, Standard Life’s head of real estate, said: “Our target is to close our first deal
before the end of the year.

“We think now is a particular moment when the lending market is becoming more diverse and we see opportunities to become a player.”

p5Anne Breen, head of real estate research and strategy, said models of how debt performs in a portfolio, using US data going back 30 years, showed that: “Investors can get very attractive risk-adjusted returns,” (see chart).

“Debt is slightly negatively correlated to direct real estate and it can provide diversity for fixed-income investors,” Breen added.

Standard Life rival Aviva Investors announced over the summer that it has launched a senior debt fund with £100m of initial capital from two investors, one an internal Aviva client and the other a UK pension fund.

Standard Life Investments’ new Canadian Real Estate Fund is also out of the blocks, with $77m of initial equity from 5 Canadian investors. CREF will be semi open-ended with a core- plus strategy and some leverage.