LaSalle Investment Management has raised £150 million (€170 million; $245.5 million) for the issuance of junior loans for UK properties.
The capital raise is the latest effort by the Chicago-based investment management arm of property services firm Jones Lang LaSalle, to fill the debt void left by UK property’s traditional lenders.
It means the firm has now raised more than £400 million for debt investments in the UK having previously raised capital to offer mezzanine loans since establishing its special situations debt division last year.
Amy Aznar, head of the division, said: “Our new junior debt programme is complementary to our existing special situations debt offer in that it looks for traditional junior debt returns at lower capital structure attachment points on core properties.”
She said: “We are seeing a growing number of opportunities to place junior debt and mezzanine at attractive risk adjusted returns. Many institutional investors see junior and mezzanine debt as attractive satellite strategies to their core real estate portfolios.”
LaSalle’s junior debt strategy is to target assets where the owner requires leverage at a 60 to 75 percent loan to value ratio. The assets would need to demonstrate ‘strength of property cash flow’ and ‘quality sponsorship’. Typical loans would be between £10 million to £75 million in size and would be offered on three to five year terms.
LaSalle director Michael Zerda, added: “The new LaSalle UK junior loan programme was specifically designed to fill that void in the market and is appropriately priced for borrowers needing 75 per cent loan-to-value debt facilities in an environment where many traditional lenders (due to tight regulatory capital restraints) are limiting new senior loan proceeds even on the most prime of assets.”
Stating that subordinate debt investment made sense in the current real estate market, he said: “We do not foresee lending conditions to improve over the medium term and are working with a large number of active senior lenders to provide combined debt packages and borrowers directly on bespoke junior debt facilities.”
LaSalle is among a number of real estate investment firms targeting the debt space in the UK and further afield in Europe as borrowers look to supplement their senior debt, currently typically only available up to approximately 65 percent loan to value. Via various subordinated debt or mezzanine products, firms including The Blackstone Group, Partners Group, Pramerica Real Estate Investors and Duet Private Equity, have also been actively raising capital for the space.