With €1.6 bn at hand and little competition in the market, BGO’s debt boss says the new UK lending fund can take its pick.
As the world enters the worst bout of financial turmoil since the big 2008 crisis, news that a global real estate investment firm had managed to close one of the largest European fundraises ever for a UK debt strategy came as a pleasant surprise.
BentallGreenOak (BGO), the New York-headquartered real estate investment firm, in early March said it was smashing an initial £1 bn fundraising target for its third UK Secured Lending Fund, securing a total of £1.433 bn (€1.6 bn) of commitments from over 25 global institutional investors, or a roughly 40% increase on its initial goal.
‘We have been lending in Europe since 2001 and have built a great track record in the market, consistently delivering strong returns to our investors,’ BGO’s managing partner and global head of debt Jim Blakemore told PropertyEU in an interview, commenting on the main drivers of the fund’s fundraising success. ‘Another reason for this accomplishment and why people invest with us, is that we have one of the largest teams specialized in private debt, supported by a big equity business in Europe, which helps us figure out the right assets in the market.’ Blakemore, a former real estate lawyer, joined BGO a decade ago to lead the firm’s European debt strategy. He previously headed the European property lending business for former US investment bank Lehman Brothers.
Given the current challenging market environment, the demand for debt solutions is expected to continue to increase at a time when many historic lenders are no longer open to new business, Blakemore noted. ‘Commercial lenders and investment banks are less active and there is little competition today from a lending point of view. From the real estate perspective, we are seeing the UK repricing quickly, and although the price correction is not over yet, this remains the fastest market in terms of repricing and it means that we are seeing more deals happening in the UK than in Europe.’
The new fund is BentallGreenOak’s third vehicle for UK Secured Lending and the sixth fund in the firm’s broader European debt strategy, which has invested almost $5 bn to date. In March 2021, the company raised €869 mln in commitments in the final close of its Europe Secured Lending Fund II, which focused on non-core and value-add assets overlooked by traditional core lenders. The fund focused on opportunities in Germany, the Netherlands, the Nordics, and Ireland.
The new UK direct lending strategy includes office, logistics, and multi-family residential property focusing on the mid-market but has the ability to provide large-cap loans. BGO, part of SLC Management, the alternative asset management business of Sun Life, will issue senior loans at a floating rate on behalf of the fund, with loan to value ratios at about 60%, and loan sizes ranging from €20 mln up until €170 mln. A key component to the fund’s strategy is to lend to borrowers ‘transitioning assets to create
value’ in a value-add play. Blakemore: ‘We are pretty agnostic regarding sectors, we are focused on making sure that what we acquire is best in class and is being built to the highest specifications, also in terms of ESG. We want our collateral to be relevant for the next 10 years, and to this end we use all the property expertise that BGO has to offer in Europe.’
BGO has already lent against the more sought-after logistics and residential sectors, but it has also provided loans for other commercial segments including office and retail as well as more niche asset classes such as hospitality and data centres. ‘We really try to be open minded when it comes to the asset class, as long as the asset is the best property in the market,’ Blakemore concluded.