Cornerstone lays foundation for European real estate debt platform

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Cornerstone Real Estate Advisors’ hiring of Laxfield Capital to manage senior debt investments in the UK is intended to lay the foundations of a third-party real estate debt funds business in Europe according to IP Real Estate.

Laxfield Capital will originate and manage senior loans on behalf of an unnamed ‘American client’ – believed to be Cornerstone’s parent company MassMutual – but the longer-term strategy is to launch debt funds in both the senior and junior lending space.

Nick Pink, director for European investment at Cornerstone, described the mandate as the ‘first step in building a bridgehead’ in the European real estate markets.

“It’s for an American client,” he said. “We are not really out in the market raising money for a fund structure right now.

“We certainly do see this business growing into a third-party business as well in the fullness of time.”

The European business, formerly Protego Real Estate Investors, was acquired in 2009 by Cornerstone – itself a subsidiary of life company MassMutual.

Cornerstone will look to export the real estate financing experience of its US operations to Europe, as part of a wider evolution of the company.

“Cornerstone in Europe is an equity shop, and we haven’t had in-house debt experience, but obviously our parent business in the US is heavily experienced in that area right the way through the capital stack,” Pink said.

The move has been “in gestation” for a period of time, but Pink said the firm’s entry into the debt markets coincided with a “perfect storm” in the form of a retrenchment on the part of traditional lenders and a wider recognition of the real estate debt opportunity among institutional investors.

Only last week, Commerzbank announced Eurohypo would be pulling out of the commercial property lending business in Europe, adding to a growing dearth of senior loans available in the market.

Laxfield Capital will target individual senior loans in the region of £25m (€31m) to £75m, with an initial focus on central London, predominantly in the office sector. The loans will be fixed-rate and have maturities of between seven and 20 years.

Pink said the focus would be on prime assets in central London at first, but may widen to other types of properties and locations, pointing to the opportunity to combine Laxfield’s lending experience with Cornerstone’s direct UK property expertise.

Laxfield already manages senior debt investments in the UK on behalf of US insurer MetLife and German bank Münchener Hypothekenbank.

Adam Slater, managing director and co-founder of Laxfield, said: “Cornerstone’s target investment size fits neatly between the business areas of our existing funders and will significantly enhance the range of deals we can cover.

“It will be especially interesting to offer seven to 12-year funding, which we see as restricted in the market at present.”

 

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