Real estate investors in Europe are increasingly picking up the phone to debt restructuring experts, so it stands to reason that financial advisor Close Brothers has made a key hire in this area.
Luke MacKenzie has joined the London-based firm's European Restructuring and Debt Advisory Group to focus on originating mandates in the real estate sector. It is the first time Close Brothers has made a dedicated property hire in its restructuring group.
Having joined from global property services firm Richard Ellis, where he advised buyout groups on asset-backed deals and funds on equity raising, MacKenzie says it has become clear that distress in the real estate market is being felt in the fund-owned sector, as well as by property companies and various investment companies, including private equity firms.
TyWe are seeing many examples of property owners breaching banking covenants due to the decline in property values, with the equity largely being wiped out.
“We are seeing many examples of property owners breaching banking covenants due to the decline in property values, with the equity largely being wiped out,” he says. “Because of the trends we see in the property market and the economy generally, we don't see that going away very quickly. Clients need restructuring services and debt expertise.”
He says there will be opportunities to advise buyout firms on the way they have capitalised on the property element of their acquisitions, but the majority of the advice will be given to dedicated property owners who are at risk of breaching the terms of their loans. The idea, of course, is to prevent forced sales in a falling market, he adds.
MacKenzie has been busy trying to inject fresh equity into property financing situations. It involves approaching “opportunistic-style investors” with mezzanine finance available to deploy, he says, adding: “A lot of overseas capital has been looking to get involved in this kind of commitment.”
MacKenzie joins Close at a time when other financial advisory firms and banks are gearing up for increased business in debt restructuring services. He points out: “It is widely known that this is going to be the dominant feature in this market.”
Competition for this kind of business is likely to come from mergers and acquisitions professionals, for example, who can transfer their expertise to restructuring. Close, however, is hoping that it will be able to sell its services partly by pointing to its independence, meaning it does not have lending commitments leading to potential conflicts of interest.
Prior to Richard Ellis, MacKenzie spent a short time at a London venture capital firm and at Morgan Stanley, as well as the US private equity real estate firm Heitman, where he worked on European acquisitions. In a statement, Close Brothers corporate finance chief executive Stephen Aulsebrook said the restructuring and debt advisory practice would be a major area of growth for the firm.