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Blackstone, TPG buy UK resi lender

The Tactical Opportunities business of Blackstone and TPG Capital’s Special Situations Partners group have bought Kensington, the specialty UK residential mortgage lender, in a sector that has just witnessed its highest monthly lending figure since August 2008

Specialist investment divisions of The Blackstone Group and TPG Partners have teamed up to buy Kensington, the specialty UK residential mortgage lender, from Investec which bought the lender in 2007 during a UK residential property bull run.

Blackstone Tactical Opportunities and TPG Special Situations Partners (TSSP) have paid £180 million ($289 million; €224 million) for the company and said today they planned to develop its mortgage lending business and broader speciality finance platform.

The deal comes as data shows UK gross mortgage lending reached £19.1 billion in July – the highest monthly figure since August 2008 according to the UK’s Council of Mortgage Lenders. It said that July volume was 7 percent higher than June and 15 percent higher than July last year.

David Blitzer, head of Blackstone Tactical Opportunities, said in a statement Kensington was “an exciting opportunity” to back a high quality management team and to invest in the UK mortgage market. Meanwhile, Michael Muscolino of TSSP added the investment was “a unique opportunity” to acquire a portfolio of scale and a platform to originate new mortgages.

The two private equity firms have appointed a new group chief executive officer to run the company under their ownership in the shape of Ian Henderson who previously served as boss of Shawbrook, a specialist bank.

Kensington was first set up in the UK specialist residential and buy-to-let mortgage market in 1994 and was listed on the London Stock Exchange for seven years until 2007. Its owner, Investec revealed earlier this year it was in talks to sell it.

It has gross assets of around £3.7 billion as at March 31 and around 140 staff. Investec said the transaction supported its “strategic objective to simplify and reshape its specialist banking business and substantially reduces the assets within its legacy non-core business”.

Blackstone’s tactical opportunities business is led from New York by Blitzer while in London. The teams also include Chad Pike in London, who is senior managing director and vice chairman of Blackstone Europe. He has led the acquisition of more than $20 billion of assets in the US, Europe, and Asia before switching to the group.

TPG Special Situations is the private equity firm’s special sits and credit platform.
Though the UK residential lending market has been booming of late, there are predictions it could cool off. “Property transactions in the first half of the year showed a 25 percent increase compared to the same period a year ago but, as set out in our recent market forecast update, we expect that intensifying affordability pressures could start to dampen this upwards trend,” said the council’s data analyst, Caroline Offord.

“Economic conditions have strengthened but while the Bank of England has signaled an improved economic outlook since May, headwinds remain and the message about future rate rises being measured and gradual remains unchanged.”