GLOBAL – Friends Life has awarded a £500m (€581m) mandate to Pricoa Mortgage Capital to provide commercial property loans in the UK, enabling the US lender to undertake bigger deals and become more active in markets outside London.
It is the first third-party mandate in Europe for Pricoa Mortgage, which moved into the UK senior debt market last year on behalf of US-based parent company Prudential Financial.
Drew Abernethy, principal at Pricoa Mortgage, said the mandate was not "out of necessity" – the company already has a significant pool of capital to invest in the European debt markets – but arose primarily because the requirements of both parties "worked so well together".
Asked whether Pricoa Mortgage would consider launching a real estate debt fund, Abernethy said "building a fund is not our goal".
He added: "This was the right type of investor with exactly the right type of attitude at the right time."
Friends Life is allocating to commercial real estate debt for the first time in a bid to "increase returns and sustainable cash generation" and to diversify risk exposure away from corporate bonds.
Mark Versey, CIO at Friends Life, said: "After extended analysis of our annuity fund portfolios, we identified [commercial property] loans as an attractive alternative source of assets to effectively meet the ongoing needs of the funds."
Pricoa Mortgage has been targeting sizeable deals in London.
Its debut in the UK in 2012 was for £70m secured against a central London office portfolio, and more recently it financed Hines's purchase of One Westferry in Canary Wharf for £48m.
The mandate will enable Pricoa Mortgage to undertake even larger deals of up to £300m for prime London assets.
"That makes us somewhat unique," Abernethy said.
The company is understood to be refinancing Plantation Place in the City of London alongside Pacific Life for £280m.
The Friends Life win will also generate a greater appetite for regional markets in the UK.
"Regional appetite was something we were previously lacking, and now that is something we can provide," Abernethy said.
"Another strategy for us in Europe has been a breadth of appetite. So Friends Life has been helpful there because they enable us to not only do bigger deals in London but give us an appetite for major UK markets other than London.
"In addition to London and UK regional markets, we remain interested in Germany and the Netherlands. So for those best-in-class managers, we can potentially be a source of debt for them for a lot of the markets they are interested in."
Abernethy, who relocated from the Tokyo office to oversee the European origination business in London, said Pricoa Mortgage was approaching the European debt markets with the intention of establishing a long-term presence.
He said it was "important to be an active lender through good times and bad times", even when markets were proving increasingly competitive.