Macquarie ramps up European lending in 2013

Macquarie Group is planning to ramp up its European real estate lending activities in 2013 following a string of deals in the past three years.

The Australian diversified financial services firm only entered the European lending space in 2010, but has already amassed a loan book with a volume of around €500 mln.

Of the €500 mln in new business the group has done since 2010, five deals were completed in 2012 and two this year. More are in the pipeline, Adam Joseph and Peter Vega, managing directors of European real estate lending at Macquarie Group in London, told PropertyEU.

PropertyEU: What is Macquarie's real estate lending strategy in Europe?
Joseph: Our strategy focuses on deals that offer the best risk-reward return for us. This includes core-plus properties, which allows us to focus on deals that other banks aren't able to. This can also include 'secondary' assets, although this classification is very broad. We will also lend on prime assets that need more leverage, whereby we can offer a senior/mezzanine loan in a 'one stop' package. This strategy is one we are also implementing with success in Asia-Pacific and in the US.

PropertyEU: What is your loan target for new business this year and how does it compare to last year?
Joseph: We don't have a loan target, but typically we look to lend between €30 mln and €100 mln, although we do have the capacity to underwrite larger deals. In addition, we can underwrite deals in weeks rather than months, due to focused and well-honed due diligence and decision making processes, which gives us a competitive advantage.

Vega: We're also open to club deals, having done one involving a portfolio of properties across multiple countries with Valad last year. It’s certainly part of our playbook.

PropertyEU:Which asset classes are you most keen to lend on?
Joseph: We're quite open-minded. So far in Europe, we have mainly lent on offices, residential properties and light industrial assets in markets such as the UK, Germany, France, Belgium and the Netherlands. We have a pan-European lending mandate with a particular focus on Western Europe, the Nordics and select parts of Eastern Europe. Our loan portfolio is fairly evenly spread across these asset classes and we’re looking to become increasingly active on the lending front this year. Recently, we hired Neil Hasson (who started as head of real estate lending at Macquarie last month), who joins from Citigroup and who has a private equity background which will help take this forward.

Vega: We're very interested in the German residential mortgage sector. In December 2012, we acquired a German residential pool with a ‘face value’ of €90 mln from UK bank RBS when they decided to exit the business. Germany has a stable real estate market in terms of pricing, as well as a stable and predictable regulatory environment, which we liked from an from a risk-adjusted return perspective. The RBS pool was also performing, which was another reason why it was attractive to us.

This year, we have also underwritten a deal for Sirius Real Estate, a UK AIM-listed company. The four-year - €28.5 mln - facility is secured by four business parks and one shopping centre in Germany and was structured partially with cash and partially with rolled-up interest. Macquarie provided a senior financing solution where it refinanced an existing lender who was exiting the German market. This is another example of where Macquarie has stepped in where traditional lenders are deleveraging or exiting.

PropertyEU:Are there any asset classes that you are not interested in?
Joseph: We are not lending on speculative developments - for any asset class as there are enough attractive opportunities elsewhere.

PropertyEU:What are the biggest challenges in the European lending market today?
Vega: The biggest challenges are liquidity and making sure that we commit capital to the right assets. However, we are generally optimistic about the European lending market. There is still a big debt-funding gap in Europe that needs to be plugged and the niche players emerging are helping to do that. We’re not looking to plug the whole gap but we have good momentum to offer bespoke capital solutions to our clients across the entire capital structure.

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