LaSalle Investment Management’s residential finance fund, backed by APG, has widened its strategy and provided a £50m (€63.8m) loan for the revamp of a hotel in Cambridge.
The £440m LaSalle Residential Finance I fund has so far financed residential and student-housing schemes, the two sectors initially targeted by the fund when it was launched in May last year.
Dutch pensions group APG backed the strategy with an initial £238m commitment before providing a second tranche this year, taking the fund to £440m.
Amy Aznar, LaSalle’s head of debt investments and special situations, said the decision to now enter the hotel sector and lend to Melford Capital Partners was an easy one, pointing to increased opportunity.
“We started to see interesting deals coming across our desk and we feel there’s a lot of opportunity in the sector,” Aznar said, adding that hotels were aligned closely to the residential and student housing sectors.
“Hotels help diversify the fund and are certainly going to be a component of its portfolio,” she said.
The fund has typically offered loans to developers looking for non-bank sources of capital between £15m and £60m up to 75% loan-to-cost.
”In the wider debt market, margins have come in this year, but we’re still able to obtain attractive risk-adjusted returns for our investors,” Aznar said.
There was comparitively less liquidity amongst lenders for development finance compared to the wider real estate finance market.
“It’s a more normalised, sustainable lending environment compared what we’ve seen in the last three years,” she added.
Last year, APG Asset Management senior portfolio manager Roland Mangelmans, said the Dutch investor saw potential in both the London residential development market and the UK student housing market, “characterised by an imbalance between supply and demand from a debt perspective”.