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Barings has announced a £250m real estate debt mandate with The Phoenix Group for its matching adjustment portfolio.
In partnership with Phoenix, Barings will build a portfolio of investment grade buy and hold UK commercial mortgage loan assets across a range of commercial property sectors, including industrial, residential and offices across Greater London and regional locations. The facilities will have a term of between five and 50 years and Phoenix will look to match the cashflows and duration of the assets against the profile of its annuity liabilities.
Barings has already agreed its first deal for the new mandate, a £30m first mortgage loan on a 30 year term secured against a mixed used office and retail property on Tottenham Court Road, London, with a loan to value below 50%.
Barings head of real estate debt for Europe & Asia-Pacific Sam Mellor said: “To have secured this mandate with a leading institution such as Phoenix is a reflection of the strength of our real estate business in Europe. We have steadily built a strong track record in the space and the ability to source off market opportunities as well as draw on our expertise as an owner and developer of real estate assets positions us well.
He added: “We are extremely pleased to be partnering with Phoenix as they build their exposure to this asset class. The insurance market is strategically important to our business and we have a long history of managing capital for insurers, with Phoenix’s focus on customer outcomes and sustainability aligning closely with our own priorities. The Phoenix mandate also aligns with our wider UK debt strategy targeting loan sizes of between £30m and £200m and diversified across the UK geographically and by asset class. As the banks retrench from the UK lending market, we continue to see a healthy pipeline of opportunities. Through this relationship we look forward to delivering strong returns to match Phoenix’s liabilities. Our performance in 2020, despite the challenging market environment, has put us in a good position as we look to grow our loan book this year in the UK and across Europe.”
The Phoenix Group head of manager oversight James Mitchell added: “We are delighted to establish this partnership with Barings with the first deal for this UK Real Estate Debt mandate. The Barings team’s experience and expertise in this asset class were clearly differentiated during our selection process and we are looking forward to working with the team to help facilitate our growing needs in this asset class. Our ability to work with our Asset Management Partners to deliver high quality UK Real Estate Debt assets is only increased with the addition of the Barings partnership.” More
The off-market acquisition by DFI is a forward commitment to The Tannery, which Watkin Jones is set to complete ahead of the 2021/22 academic year.
The building comprises 415 en-suite rooms and 47 studios, as well amenities including a cinema room, games room, fitness studio, lounges and study areas. It will be operated by Watkin Jones’s asset management business Fresh.
The investment is DFI’s second in the UK PBSA sector, after it bought Canterbury Student Manor in 2017. It sold the building on in 2019, two years ahead of its plan, after increasing occupancy from 79% to 100% and reducing operating costs.
The pan-European investor, which manages more than €2.7bn (£2.35bn) of assets, also has a portfolio of 1,100 student beds in Denmark.
“This off market transaction represented a compelling opportunity for us to build on our UK student accommodation exposure and take advantage of the current market dislocation with the acquisition of one of the few newly constructed PBSA assets in Leicester,” said DFI investment director Paul Nearchou.
“Watkin Jones is one of UK’s leading developers and we are confident that they will deliver a high quality, modern product ready for the 2021/22 academic year. The outlook for the UK student sector remains strong, with supportive demographics and growing domestic and international demand.”
Watkin Jones chief investment officer Alex Pease, added: “It’s brilliant to secure institutional investment for this superb scheme that only adds to the growing desirability of Leicester’s dynamic riverside area. What was a brownfield site in need of regeneration will shortly offer hundreds of residents a really attractive place to live with easy access to two respected universities, as well as the shops, bars and cafés of the city centre.”
He added: “Working with DFI for the first time to complete this sale has been a real positive and the team look forward to continuing our relationship into the future. My thanks go to everyone involved in making the deal happen.”
DFI was advised by CBRE. More
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