LaSalle sees ‘best investment opportunities’ in UK debt space

Real estate investment manager LaSalle Investment Management sees the best investment opportunities in the UK debt space, despite the looming threat of a potential Brexit, Amy Klein Aznar, head of debt investments and special situations at LaSalle in London, told PropertyEU at MIPIM.

‘This year, we could underwrite more than £500 mln (€633 mln) in mezzanine and whole loans in the UK and Europe. So far this year, we have underwritten or are currently closing £200 mln of loan facilities. We’ve been more active in the UK because that is where our network is strongest and the structure of the lending market suits us. In the past 12 months, we have underwritten more than £550 mln in loans in the UK across 12 deals. We’ve also done deals in France and Germany.’

Neither would a Brexit materially affect LaSalle’s debt investment strategy, according to Aznar, because ‘our continued focus will be on the strength of the underlying real estate asset in its micro-market and the quality and robustness of income on a given property’.

Moreover, despite some short-term investor caution before the Brexit vote and also afterwards should there be a Brexit, there could be an upside, said Aznar: ‘While a Brexit could lead to a short-term reduction in transaction volumes, it could, at the same time, generate some attractive buying and lending opportunities.’

LaSalle is primarily interested in providing mezzanine loans across its debt and special situation funds, Aznar said. It will lend on office, retail and logistics properties as well as student housing and hotels, both in the UK and Western Europe. ‘We’ve been very active in student housing having lent £228 mln over the past few years in the sector; we underwrote a £76 mln loan on a student housing asset, 12-24 Paul Street in Shoreditch, London, last year, for example. We are also looking at becoming more active in the healthcare space as well as increasing our activity in student housing across the UK. We’ll also finance conversions if the asset is well-located and if the existing use supports our loan value,’ she added.

The group’s special situation funds target structured risk-adjusted returns via structured real estate investments such as preferred equity, joint ventures and mezzanine debt. ‘Our debt funds target mezzanine and whole loans both for new acquisitions and refinancings and our typical LTVs average 75% with average mezzanine returns in the high single-digit range, though pricing depends on the risk of the particular deal,’ she said. ‘We also feel that we can complement senior lenders in the UK particularly effectively. To provide a 75% LTV loan, for example, a senior banking partner might lend 60% LTV, with LaSalle providing 15% of the capital structure.’

Typically, LaSalle underwrites five-year loans in the region of £10 mln to £120 mln. ‘We’re very flexible, though,’ said Aznar. ‘Teaming up with senior lending partners is also a key strategic approach for us – we like to partner with senior lenders and provide a straightforward whole loan solution to borrowers. Sometimes, we will offer joint terms with a senior lender.’ LaSalle has already partnered with a number of senior lenders on European loans, including Wells Fargo, Lloyds Bank, Barclays and MetLife as well as German lenders pbb, Aareal Bank and Helaba.

LaSalle has raised £1.6 bn for its debt and special situations funds since 2010. This includes raising €765 mln of equity in 2013 for its LaSalle Real Estate Debt Strategies II, a European real estate debt fund focused on providing whole loan and mezzanine loans secured against real estate in the UK, Germany and the Benelux region.