Term Sheet: Blackstone goes big with a combined structured finance platform, SVPGlobal eyes European distress, UK single-family-rental attracts global capital

Investment giant Blackstone emphasises the importance of credit to its business with the launch of a structured finance group; Victor Khosla of US distressed debt specialist SVPGlobal believes there is opportunity ahead in Europe; Ares’ arrival in the UK single-family-rental market indicates international attention is turning to the sub-sector; and more in today’s briefing, exclusively for our valued subscribers.

They said it

“If we sit here and say we’ll do nothing about decarbonisation, that will destroy value.”

Neil Slater, global head of real assets at manager Aberdeen Standard Investments, at the COP26 conference in Glasgow last Thursday. Read affiliate title PERE’s coverage here.

What’s happening?

Leading the way
Blackstone has launched a designated structured finance group. The move reflects how big a role credit has started to play for the $730 billion manager. And the person tapped to run it shows how big a role real estate will play for the new platform. Jonathan Pollack, the current global head of Blackstone Real Estate Debt Strategies, has been promoted to global head of the Structured Finance Group. The new unit will combine BREDS and the firm’s various asset-backed finance activities. Meanwhile, BREDS’ senior managing director Mike Wiebolt will also manage asset-backed securities in addition to his current responsibility of managing the group’s liquid securities. In a statement, the mega-firm’s president and chief operating officer Jonathan Gray said: “The time to expand this part of our business has never been better, particularly as we deploy increasing amounts of insurance capital.”

Distress ahead?
According to one US-based distressed debt specialist, European real estate markets are worth watching for opportunities in the coming few years. Victor Khosla, founder and chief investment officer of SVPGlobal, told Real Estate Capital Europe the firm is biding its time as distress emerges, particularly in the offices and leisure sectors, due to the covid-19 pandemic. “Going forward, we think the private opportunity is bigger in Europe than it is in the US. It has just been slower to take off,” adding that SVPGlobal has expanded its team on the ground in the region. Read his thoughts on the matter here.

Entering the big leagues
Lenders should take note of the growing number of private equity real estate firms expanding into the single-family-rental space in the UK. But the entrants to date, including Apache Capital Partners, Fiera Real Estate and Legal & General, have all been UK- or Europe-focused firms or platforms. Global alternative investment manager Ares Management Corporation’s own SFR debut via a joint venture with local build-to-rent developer Moda Living, therefore, marks a milestone in the institutionalisation of the sector in the UK. The partners are aiming to develop more than 5,000 suburban homes across the country with a gross development value exceeding £1 billion (€1.2 billion) by the end of 2025. Construction is slated to begin in Q1 2022.

Finishing strong
In the US market, Bank of America Securities sees a strong finish to 2021 for the country’s commercial mortgage-backed securities market, significantly increasing its issuance forecast to about $145 billion-$155 billion, up from roughly $125 billion-$135 billion. This activity stems from a strong year-end pipeline, managing director Alan Todd said in an interview with affiliate title Real Estate Capital USA last week. Here’s the rub: Todd raised his forecasts for the single asset/single borrower and commercial real estate CLOs markets, but left projections for the beleaguered conduit market unchanged. Borrowers, he explained, continue to prefer non-conduit executions. Read the story here.

REC Europe Awards 2021

Don’t forget to get in touch!
There are less than two weeks left for you to tell us why your organisation ought to be in contention in one of the 33 categories for the Real Estate Capital Europe Awards 2021. The stand-out organisations and transactions in Europe’s property lending market this year will be recognised in the awards. But as we prepare to compile the shortlists, we want to hear your highlights from a year of challenges and opportunities.

If you believe your organisation deserves to be considered for an award, click HERE to submit your achievements in 2021 so far – the deadline is midday UK time, Friday 19 November. Voting will open in December, with the winners announced in our spring 2022 edition, and online at recapitalnews.com in March next year.

Data snapshot

The scare in scarcity
Finding deals and the resources to develop assets are top sector concerns, according to a survey of real estate executives, published last week.

Loan in focus

Vauxhall and Third.i
The Vauxhall, Nine Elms and Battersea Opportunity Area of south London has been popular with residential developers in recent years. This week, alternative investment manager Cheyne Capital Management announced it has provided £103 million (€120 million) of senior debt to finance the acquisition of a site and the development of a residential-led mixed-use scheme in the Vauxhall area.

The 279,000 square foot site, named Graphite Square, is due to be transformed by Australian developer Third.i – in its second London development – into 160 apartments, 50 of which will be designated affordable, as well as 80,000 square feet of workspace, and 400 square feet of retail. The affordable housing has already been sold and the office space pre-let. According to Cheyne’s head of UK real estate, Arron Taggart, the loan underscores the lender’s “continued interest in investing in multi-purpose sites”.

Today’s Term Sheet was prepared by Daniel Cunningham, with Samantha Rowan , Jonathan Brasse and Kyle Campbell contributing.