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IPE special report May 2018

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APG, LaSalle to finance UK residential, student housing

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  • APG, LaSalle to finance UK residential, student housing

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EUROPE – Dutch pension fund manager APG has teamed up with LaSalle Investment Management to provide £238m (€282m) in senior debt financing to London residential projects and UK student housing developments.

The joint venture means APG now has two managers overseeing its real estate debt investments in Europe, having earlier awarded a mandate to Pramerica Real Estate Investors to invest in commercial property debt.

LaSalle Residential Finance I will focus exclusively on providing developers with senior-ranking, whole-loan financing for residential projects in London and student housing schemes in major university towns in the UK.

Roland Mangelmans, senior portfolio at APG Asset Management, said: “The London residential development market and UK student housing market is characterised 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.”

Micheal Zerda, manager of the fund and European director of debt investments and special situations at LaSalle, said the fund was “the only vehicle of its size in the market today” pursuing such a strategy.

The fund will offer loans of between £15m (€18m) and £60m up to 75% loan-to-cost, and LaSalle expects to announce the first deal shortly.

“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,” Zerda said.

“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.”

The announcement of the new strategy coincides with news that Legal & General Property is also increasing the size of its lending book to student accommodation developments in the UK.

Legal & General Property has forward funded a development in the Elephant & Castle area of London for £25.7m, the fifth deal of its kind made by the company.

The development is pre-let to University of the Arts London (UAL) and scheduled for completion in August 2015 in time for the 2015-16 academic year.

The developer is Spiritbond Elephant & Castle, a 50-50 joint venture between Spiritbond and Watkin Jones Group.

LaSalle, meanwhile, has been active mainly in the commercial property debt markets so far – in the form of stretched senior, mezzanine and whole-loan investments on behalf of its UK Special Situations Fund and its Junior Loan Programme.

Amy Aznar, head of debt investments and special situations at LaSalle, said the new fund was “highly complementary to our existing debt strategies and enables LaSalle to offer wide-ranging debt solutions to borrowers spanning acquisition finance, refinance, recapitalisation and development/redevelopment.”

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