LaSalle Investment Management, the Chicago-based firm has closed LaSalle Residential Finance I, a £238 million fund (€277 million; $359 million) with Dutch pension fund asset manager APG targeting whole loan development finance for the London residential and UK student housing sectors in major university towns across the UK.
The arrangement is the first venture of its kind for the pair and is the follow-on to LaSalle’s LaSalle Special Situations UK Real Estate Fund I and LaSalle Junior Loan Programme.
Revealing the close of the fund, LaSalle said the equity gave it firepower for more than £400 million of projects and that it envisaged “follow-on capital” following successful deployment of the first tranche.
In a statement, the company said: “LRF I offered APG Asset Management access to a niche targeted market opportunity and knowledge of LaSalle’s established UK property and European debt platform. The success of this venture could lead to a follow-on commitment, further increasing much needed debt investment in the UK property market.”
Michael Zerda, manager of LRF I and European director of debt investments and special situations added LaSalle Residential Finance I was the only vehicle of its size in the market offering developers whole loan construction finance on student housing and residential development in the UK. “With the traditional banking market still dealing with regulatory pressures and balance sheet pressures, this allows us to fill a clear gap in the financing market,” he said.
The fund offer loans between £15 and £60 million, typically up to 75 percent loan to cost. The partners expect to announce its first deal shortly.
Zerda said: “We have had high levels of interest from a wide variety of developers looking for non-bank sources of capital and expect this trend to continue in the medium term. We aim to make between five to seven loans in the next six months and view this as the first tranche of a long term and larger scale strategy.”
Roland Mangelmans, senior portfolio manager of APG Asset Management said: “The London residential development market and UK student housing market is characterized by an imbalance between supply and demand from a debt perspective. Simultaneously from an equity point of view APG perceives these markets as attractive, with sound fundamentals. This real estate debt strategy contributes to APG’s overall real estate debt portfolio and provides further diversification.”
Amy Aznar, head of debt investments and special situations said: “LRF is highly complementary to our existing debt strategies and enables LaSalle to offer wide ranging debt solutions to borrowers spanning acquisition finance, refinance, recapitalization, and development/redevelopment.”