Sampension makes first forays into direct CRE lending

Danish life insurance company Sampension has completed its first two direct commercial real estate debt deals totalling DKK 500m (€67m), as it embarks on a cost-cutting initiative aimed at minimising third-party fees, reports Real Estate Capital’s sister publication, Private Debt Investor.

The two transactions have been made in Europe on a co-investment basis, said Kasper Ullegård, Sampension’s head of fixed income.

Sampension, which oversees three pension schemes in Denmark and has €27bn in assets under management, appointed Theis Nygaard as a credit portfolio manager in July to help support investment into a broad array of direct lending and other structured finance. He joined the firm from investment bank Nordea Markets, where he was a chief analyst for eight years and head of derivatives structuring for six.

Hellerup-headquartered Sampension has been eyeing direct real estate lending for some time and has previously invested in private debt through managers in Europe but predominantly the US.

“There is a constant push for cost cutting in terms of investment fees that has led us to internalise our investment activities in general,” said Ullegård.

“We are very slowly navigating the direct lending space. We have no illusions about our ability to have the best deals shown or be experts in legal matters and so forth… But in order to gain some volume at a future time, we need to start somewhere.”

There are ambitions to enter a much broader investment universe. However, at present, direct debt exposure within the firm is limited to financing commercial property investments.

Both investments so far were beyond Sampension’s local market.

“The Nordic banking area and in particular the Danish market is very well-functioning where mortgage lending margins are low on an international comparison and we don’t want to compete with that. It may be that we feel more at ease with credit in our home market but the pricing is not worth it. At least that’s how it is now – it may very well change going forward,” said Ullegård.

Sampension aims to provide financing that is slightly longer in duration compared to banks. The pension fund’s loan tenors will be somewhere in the region of six to eight years, as opposed to three to five.

The scheme also prefers senior debt subject to pricing. The lender has not set out strict rules regarding the kind of deals it will do, however.

“We perceive 2015 as the learning year,” said Ullegård.

Direct lending is a trend that Ullegård thinks will grow throughout the institutional investor industry.

“The cost of active management is expensive and it is made very visible in various reporting requirements that are put on the Danish life insurance and pension companies. That alone creates a reason to see if you can in-source various parts of your asset management,” said Ullegård.

“[Direct lending investment] does not necessarily have to be through a manager now. We can participate in it ourselves.”