LaSalle Investment Management, the private equity real estate division of global property services firm Jones Lang LaSalle, has held its first equity closing for its £100 million (€119 million; $156 million) UK Special Situations Fund.
Through the fund, the Chicago-based firm aims to invest in structured investments and real estate debt, the firm said in an announcement today although it did not divulge how much capital it had closed on.
It said it was working with banks and borrowers in order to source mezzanine and preferred equity investments with a view to completing recapitalisations, restructurings and new acquisitions. LaSalle is also to use the vehicle to source asset management opportunities.
The firm said: “There is an emerging shift in UK/European bank behaviour which is leading to signs of increased activity by banks looking to reduce exposure to legacy loans and by borrowers looking to raise mezzanine finance.”
“(We) believe there are opportunities to fill the debt gap that exists as real estate is deleveraged as a result of falling values and banks being unable to lend at historic leverage levels. This can be achieved through recapitalising real estate assets, acquiring debt, or originating mezzanine loans to fund new acquisitions.”
It also reported experience of “seeing senior banks quote debt terms at the 50 – 65 per cent level with spreads of circa 150 – 200 basis points.” With the five year swap rate in the UK below 2.5 percent and the Euro five year swap at 2 percent, LaSalle said the cost of senior debt combined with mezzanine finance up to the 70-85 percent level was “accretive” to equity resulting in better returns for buyers.