Colony Capital to raise €500m to €1bn for European debt strategy

Colony Capital to raise €500m to €1bn for European debt strategy
Posted on September 18, 2012 3:33 pm by James Wallace

Colony Capital is looking to raise between €500m and €1bn over the next 12 months for a first lien European senior debt strategy, deepening the global private equity firm’s real estate debt offering across the capital stack, CoStar News can reveal.

http://costarfinance.com/2012/09/18/colony-capital-to-raise-e500m-to-e1bn-for-european-debt-strategy/

Thibault Chauvin has been recruited from Credit Foncier, where he was managing director, head of international real estate finance for four years.

Prior to which he spent eight years in London, including real estate structured finance roles at Morgan Stanley, Merrill Lynch, Eurohypo and Deutsche Bank.

Colony Capital – which has nominal exposure to around $10bn of real estate debt investments globally, the majority of which in the US – will predominantly focus on senior, stretched senior and whole loans in core Western and Northern European markets.

These markets comprise the UK, Germany and France. To a lesser extent, Colony will also seek to finance commercial property in the Netherlands, the Nordic countries and Poland.

Chauvin’s team will have the flexibility to finance prime and good secondary properties – including hotels and even select development finance – as well as CMBS loan restructuring opportunities.

It is yet to be decided whether Colony Capital’s limited development finance lending will be part of the overall business or in ring-fenced fund.

Overall, the debt fund will target circa 5% to 8% internal rates of return, on a risk-adjusted basis.

Colony Capital will seek to build relationship with banks, insurance lenders and debt funds to lend in club deals, with individual ticket sizes starting from the mid €50m to €70m-size range upwards.

Chauvin, who joined at the start of September and reports to Colony’s four-strong European executive committee, he has already hired Etienne Wronecki from AEW Europe.

Colony becomes the latest private equity firm to diversify into European real estate lending, joining Renshaw Bay, Starwood Capital and Fortress Investment Group on the capital raising circuit both sides of the Atlantic.

The opportunity for new entrants for European real estate remains enormous, but none of the big private equity funds have yet completed their first closings, in an indicator of just how protracted – and crowded – the capital raising process for European debt funds currently is.

Henderson Global Investors, AgeFe, Cordea Savills and AEW Europe are also raising debt funds.

The lending appetite extends Colony Capital’s existing European debt offering, which began in 201o with a strong of non-performing loan (NPL) portfolios in Germany, including buying the nominally-valued €370m syndicated loan portfolio sold by Eurohypo, Berlin Hyp, Heleba and Archon Capital Bank.

Last autumn, Colony was also a finalist for Lloyds Banking Group’s inaugural UK loan portfolio, the £923m nominally-valued Project Royal, which traded to Lone Star last December.

Colony, which has a 35-strong European team in total and is likely to recruit further for the new debt strategy when the business line matures, can also deploy capital from its global debt fund in mezzanine transactions on this side of the Atlantic.

Ten days ago, CoStar News revealed that Cheney Capital Management had raised $300m to deploy in predominantly UK mezzanine and stretched senior loans.

jwallace@costar.co.uk

http://costarfinance.com/2012/09/18/colony-capital-to-raise-e500m-to-e1bn-for-european-debt-strategy/