Starwood Capital hires Peter Denton in £1bn European lending drive

Starwood Capital hires Peter Denton in £1bn European lending drive
Posted on April 26, 2012 11:45 am by James Wallace

Starwood Capital, the global private equity real estate firm, has hired BNP Paribas’ Peter Denton to spearhead a £1bn European debt fund, with flexibility to invest across the capital stack.

http://costarfinance.com/2012/04/26/starwood-capital-hires-peter-denton-in-1bn-european-lending-drive/

Denton, who joins as a partner and head of European debt next Thursday, will bolster the capital raising efforts which have been underway since the turn of the year, targeting Starwood’s existing investors including pension funds, insurance companies, sovereign wealth funds and high net worth individuals.

The first closing of Starwood’s first-ever European debt fund is likely to close after the summer with a final closing by the year end. Denton is likely to recruit loan originators once the fund has completed its final closing.

Starwood’s lending appetite will be flexible across duration and type of finance, with a focus on primary origination up to traditional mezzanine levels, at circa 75% LTV, across acquisition finance, refinancings as well as loan-on-loan financing secured by loan portfolios sold by deleveraging banks.

Starwood will likely have a final hold of up to 10% of the total fund’s capital, but will seek to arrange larger club deals, and invest from prime down to distressed real estate principally throughout the major Western European markets, including the UK, Germany, France and the Nordic countries.

Debt pricing will be determined by market-driven dynamics, reflecting the trade-off all debt funds seek to balance between volume and returns. Currently senior debt is priced around 300 basis points, while distressed secondary loan portfolios is up to 600 bps with mezzanine typically varying even wider, between 900 and 1400 bps.

The blended margins which Starwood achieves across the fund’s lending will seek to target an internal rate of return of mid to high single-digits.

Denton will report to Jeff Dishner, Starwood’s international president, who moved over to London last August to build-up a two-pronged business focus: distressed loan portfolio opportunities and European debt origination, in addition to its existing real estate investment business line.

In Januray, Adam Shah moved over from Greenwich, Connecticut headquarters. He focuses on loan portfolio opportunities, while Jens Cramer is responsible for mezzanine lending at Starwood.

Denton’s migration over to the fund side, follows a number of similar switches by senior bankers, including former Goldman Sachs banker John Barakat to M&G Investments, Deutsche Bank’s former head of European real estate finance, Cyril Courbage, to Fortress Investment Group, and Jon Rickert to Renshaw Bay after 15 years at JPMorgan.

Similarly, Keith Davidson and James Tarry have both just joined Cordea Savills this week from Palatium Investment Management, to set up a real estate lending platform.

In his 12 months at BNP Paribas, Denton closed a string of deals for the French bank, including leading, along with HSBC, a six-bank £300m refinance of a Capital & Counties Properties’ Covent Garden portfolio last November.

Less than three months earlier, Denton’s BNP lending team was part of the six-bank £400m refinancing of Aviva Investors and SEGRO’s £700m Airport Property Partnership, in what was one of the largest industrial portfolio refinancings in recent years.

In Europe, Denton arranged for BNP a three-bank refinancing of Goodman’s €1.6bn European Logistics Fund, which included a €400m revolving debt facility.

At last month’s CRE Finance Council Spring conference, Denton was named as its chairman-elect, succeeding Christian Janssen, managing director, head of European CRE debt capital markets at Jefferies International.

His two-year term as chairman begins in November 2013, at the industry body’s autumn conference.

Denton has more than 17 years’ real estate sector experience, having previously run WestImmo’s London office as branch head, where he managed its London-based real estate finance activities.

Prior to this, he held similar senior roles for EMEA real estate banking at Barclays Capital, Eurohypo and Deutsche Bank.

The emergence of debt funds and non-bank lenders has been considerable in recent years, as new participants seek to exploit the unique market circumstances which have developed in the years since the global financial crisis.

There exists a colossal supply and demand mismatch in the €2.4trn European debt markets, with as much as €500bn maturing across bilateral and securitised debt by the end of 2014. Over the same three-year period, this has created a circa €92.4bn ($122bn) Europe-wide funding gap, according to DTZ Research’s November 2011 estimates.

The resulting scale and longevity of opportunities in European real estate debt markets, further enhanced by the likely long-term upward re-pricing of debt, has prompted the aggregation of pools of institutional capital in funds which can typically lend more flexibly than traditional banks, across floating and fixed-rated debt as well as over longer durations.

Real estate debt funds, like Starwood’s, are likely to form an increasingly prominent minority in the total availability of debt as the market slowly unwinds from its current almost gridlocked condition.

jwallace@costar.co.uk

http://costarfinance.com/2012/04/26/starwood-capital-hires-peter-denton-in-1bn-european-lending-drive/