Cordea Savills sets up property lending business
Cordea Savills has become the latest fund manager to set up a property lending business.
The company, which is partly owned by property services firm Savills, has hired Keith Davidson and James Tarry from property debt specialist Palatium Investment Management to lead a new business that will provide senior and mezzanine lending as well as buying loans.
Fund managers are looking to become lenders in increasing numbers, due to the fact that, because banks are increasingly withdrawing from lending to property, the returns that can be achieved through lending are high relative to the risk taken. Institutions like AXA Real Estate Investment Management and M&G Investments are already in this area, and private equity players like Fortress and Starwood Capital are looking to raise new funds.
The duo have been appointed as co-heads of debt investment and one of the first initiatives will see them working closely with the team of the Prime London Residential Development Fund, which was launched in October 2011 and where the provision of mezzanine finance to developers is a core strategy.
Cordea said the debt team will create investment vehicles to provide new investment finance, or to acquire existing financing arrangements, hoping for attractive risk-adjusted rates of return.
“The debt funding gap is likely to continue in the medium term. It was not unexpected that more money was raised for debt funds in Europe in the third quarter of last year than for equity funds,” said Justin O’Connor, Chief Executive Officer at Cordea Savills.