Term Sheet: Chenavari’s continental debt strategy, Kennedy Wilson’s green financings, debt’s growing appeal to investors

Chenavari’s new Paris-based business provides a platform for continental European lending strategy; Kennedy Wilson’s triple Irish financing deal comes with green conditions; ANREV, INREV, and PREA’s latest survey shows investors are pivoting to debt; and more in today’s briefing, exclusively for our valued subscribers.

They said it

“When someone calls with $4bn of capital, you answer the phone

Nadeem Meghji, Blackstone’s head of real estate Americas, discusses US endowment UC Investments’ commitment to its biggest real estate fund, BREIT, with affiliate title PERE. For more read here

What’s happening?

Source: Getty

Chenavari’s continental push
Credit-focused manager Chenavari has a fresh real estate debt strategy, launched from its newly-established Paris-based business, Chenavari Asset Management. Chenavari is no stranger to real estate credit. The London-headquartered firm sourced high-yielding opportunities after the global financial crisis and has done deals in the past decade in markets including the UK, Germany, and Spain.

The firm said the Paris-based business line gains it “anchorage” within the continental European market. Leading the new strategy are two former executives from Paris-based manager SCOR Investment Partners. Gilles Castiel, who joined last September, is head of real estate for the new asset management company. Alix Baret Lardenois, who joined last July, is senior real estate debt fund manager. Both have experience in value-add financing, across senior and mezzanine debt. The company said the pair will devise a strategy that will “contribute to the transition to a low-carbon economy”.

Sterling targets European expansion
Bahamas-based manager Sterling Global Financial is another organisation that sees opportunities in European real estate debt markets. The firm plans to further expand its activities in Europe by providing bridge loans. It has registered its global fund, Sterling Mortgage Income Fund, in the UK and Switzerland, and is aiming to grow the fund to $500 million from its current size of $210 million.

Sterling is likely to have a strong focus on the UK and Ireland, with the possibility of doing deals in jurisdictions including the Netherlands. It has some experience of the European market already, having originated two loans for office-to-residential conversions just outside London last year. The firm, which predominantly invests in the Caribbean, US and Canada, appointed former Morgan Stanley capital markets specialist Nick Brennan last year to spearhead its European expansion. Keep an eye out for further coverage on recapitalnews.com this week.

Casino bets on sales
French supermarket chain Casino Group has instructed financial services group Rothschild and French investment bank Natixis to sell a portfolio of 22 properties as part of its plan to raise capital to repay its debts, React News reported. The 3.4 million square foot Project Agathe portfolio consists of hypermarkets and supermarkets in towns across France.

React News reported (subscription required) that the sale is expected to raise €250 million. It would take Casino one step closer to €4.5 billion of asset disposals, a programme it initiated in 2018 and hopes to complete by year-end. As of November 2022, it had completed €4.1 billion of divestments. Casino has €4.4 billion of outstanding maturing bond debt between 2023 and 2027.

Mezzanine demand steps up
Berlin-based adviser and manager FAP Group is riding the wave of increasing demand for mezzanine debt by converting its mezzanine vehicle, FAP Balanced Real Estate Financing I, from a closed-end to an open-end fund with unlimited duration. Before it was converted, FAP BREF I had €300 million of equity. In Q4, existing German investors committed an additional €65 million. FAP expects the fund to reach €400 million of commitments by the end of this year.

Hanno Kowalski, managing partner of FAP Invest, said the conversion was “incited by investor demand”. He added that the fund, which is not levered, is targeting an IRR of between 7 percent and 7.5 percent. “The commitments came in a difficult market environment in which fundraising for real estate private debt funds hardly happened,” Kowalski said.

Another harvest for Kennedy Wilson
Irish lender AIB has said it wants green loans to account for 70 percent of its origination activity by 2030, a strategy of which Beverly Hills-headquartered real estate investment company Kennedy Wilson is a beneficiary.

Kennedy Wilson, which said it has an “ongoing commitment to environmentally sensitive development practices” in Ireland, has secured €110 million in green loans for 139,000 square feet of three newly-constructed office properties in Dublin. These are located at Ten Hanover Quay, 20 Kildare Street and 94 St Stephen’s Green. A condition of the latest round of finance, Kennedy Wilson said, was to demonstrate climate change mitigation initiatives at each project.

The financing follows a €77 million loan from AIB’s green loan programme, which Kennedy Wilson received in August 2022.

Accolade’s Polish refinancing
In a significant financing deal for the Polish logistics market, Czech Republic-based industrial owner Accolade has sourced €129 million to refinance five industrial parks. The loan was provided by Helaba. Accolade, which borrowed from the Frankfurt bank for the first time, procured the financing within two months of signing the term sheet. It said the lender required it to have strong financial standing, low vacancy, strong cashflow and proper debt service coverage.

Speaking about the wider market, Accolade said higher financing costs have become “very demanding” for some property investors, adding that banks currently tend to be very selective on real estate segments and clients.


Investors turn to debt
Non-listed real estate debt topped the chart for the highest expected increase in institutional investor allocations in Europe for the next two years, according to the findings of the latest Investment Intentions Survey by industry bodies ANREV, INREV, and PREA, which can be seen in brief here.

The figures highlighted that 62 percent of respondents plan to increase their allocations to non-listed real estate debt vehicles – the highest expected increase across all types of investment in real estate strategies. The report said the preference for non-listed real estate debt – which is shared by small and large investors alike – supports the conclusion that all investors are looking for less risky strategies, with senior debt, in particular, well placed to meet that need.

People moves

JLL hires in Southern Europe
Property consultant JLL has added a Southern European specialist to its debt and structured finance advisory business, expanding its reach into the region. The firm hired Amadeo Giménez as director [his LinkedIn here].

Madrid-based Giménez joined the business from financial services firm Alantra, where he was director in the credit portfolio advisory team. At Alantra, he led work on the disposal of non-performing loan and real estate-owned portfolios for clients, as well as advising on the financing and refinancing of real estate.

Brad Greenway, co-head of JLL’s debt and structured finance unit, said the hiring would bolster its team at a time when “local borrowers grow reliance on international capital sources due to traditional domestic financial institutions progressively reducing their exposure to the real estate sector”.

Joining the cohort
UK-based specialist lender Cohort Capital has made a hire designed to broaden its product offering and capital base to take advantage of “the opportunities presented by the disrupted private debt market”.

The firm has hired Robert Pritchard [LinkedIn here] as head of capital markets. Pritchard joined the firm from London-based specialist debt provider LendInvest, where he headed the firm’s fund management business. Previously, Pritchard held roles at property adviser CBRE’s capital advisory business and UK lender Barclays, where he originated and structured real estate-backed loans for corporate clients. In 2022, Cohort originated more than £240 million (€273 million), bringing its loan book to £325 million.

Data snapshot

Caution continues
The latest European lending terms data published by CBRE showed lenders reduced senior loan-to-values against prime real estate again in Q4 2022, amid uncertain conditions. However, the property adviser also noted signs of stabilisation in lending terms in parts of the market. Read the full coverage here.

Loan in focus

Wooden: The Luxembourg building’s load-bearing structure is made from wood (Source: Münchener Hypothekenbank)

Lender plants finance at wooden office
The acquisition of an innovative wood-based office building in Luxembourg has been financed with a €47.5 million loan from German property lender MünchenerHyp. ACRON Group, a Düsseldorf-based private real estate investment management firm, completed the purchase of the 103,600 square foot property in January.

The building has a load-bearing structure made entirely from wood, a timber frame that spans six floors and was sourced from local sustainable pine and spruce forests. Wooden, as it is known, was built by BPI Real Estate, the real estate division of Belgian industrial group CFE and IKO Real Estate, a Luxembourg-based developer. It is the headquarters of Swiss insurance company Baloise, which took residence earlier this month. Wooden has a BREEAM excellent and WELL Building standard certificate.

Holger Horn, CEO of Münchener Hypothekenbank, said the transaction once underlined the success of “its strategic approach to expand the ESG-compliant loan portfolio”.

Today’s Term Sheet was prepared by Daniel Cunningham, with Lucy Scott, and Mark Mwaungulu contributing