LaSalle’s European debt business has raised almost £600 mln (€693 mln) of fresh capital for its two main lending strategies and continues to broaden the scope of its lending platform.
LaSalle Investment Management has secured £334 mln (€385 mln) of initial equity for its latest high-yield debt fund, LaSalle Real Estate Debt Strategies III (LREDS III) which makes mezzanine and whole loans in the UK and Western Europe, including the Benelux, France, Germany and Spain. The investment manager said that it is on target to exceed the £600 mln size of LREDS II as it continues to fund raise.
The firm has also secured a third tranche of capital for LaSalle Residential Finance, its joint venture with Dutch investor APG, this time of £264 mln (€305 mln). This equity is for stretched senior lending on UK residential development at a loan-to-cost up to 80%, including build to rent, student housing and hotels as well as residential for sale. The focus on build for sale is for schemes selling at around £1,000 per sq ft rather than prime values.
The debt investing business, led by Amy Aznar, has also added UK healthcare developments to the assets which LRF III can lend on, in a continuing evolution of its scope. LRF II had added hotels to its residential focus.
In addition, Aznar said that the partnership with APG is 'exploring' lending on student housing development in continental Europe for the first time, and that when they find the right transactions, this would involve investing an additional tranche of capital. 'I think you’ll see us doing deals like that soon in main university cities,' she said.
Established UK-based non-bank lenders such as LaSalle have been expanding their lending strategies generally in the last 12 months and firms including TH Real Estate, Aviva Investors, Standard Life and GreenOak are beginning to lend on the Continent for the first time.
Aznar said LaSalle has a good pipeline of transactions including opportunities created by banks remaining relatively cautious, and that the last month has been notably busier 'with a pick-up in activity'.
'Our target returns remain quite similar. With the LREDS funds we’ve always had realistic risk-adjusted return targets and been a very active market participant. We’ve seen banks pulling back a bit since the UK referendum, and so with average LTVs for senior at or below 60%, the mezzanine opportunity is just as pronounced as it has been over the past years.
'On the development lending side, there has been a decrease in activity from development funders, particularly on large loans.'
Aznar’s team has not yet made a first loan for LRF III. LREDS III’s first transaction was providing £38 mln of five-year mezzanine finance alongside banks lending the senior, for BMO Real Estate Partner’s £191 mln acquisition of a three-strong UK retail portfolio from British Land. The assets are Debenhams in Manchester and retail parks Clifton Moor in York and Westgate in Wakefield.
She said the capital for LREDS III was raised relatively quickly with capital raising beginning in the second half of last year 'and huge momentum for the fund in the last couple of months, particularly from UK pension funds this time round, which is interesting. We’ve got more investors from the UK than in the last fund in terms of numbers.'
LaSalle now invests for between 20-30 investor clients across all its debt funds and lending programmes, Aznar said.
