AllianceBernstein, the $631 billion US investment manager, is the latest entrant to Europe’s commercial real estate lending market, in which non-bank organizations are aiming to take advantage of the market dislocation caused by the covid-19 pandemic.
In November, the New York-based company bought a strategic stake in Lacarne Capital, a property lending business launched in January by Clark Coffee, previously the head of real estate for London-based lending platform Tyndaris.
The new business will launch with €1.2 billion of initial capital, committed by organizations including lead initial investor Equitable Holdings, the US financial services firm. AllianceBernstein suggested the amount of capital at its disposal makes the launch one of the largest in the European property lending market to date.
In a statement, AllianceBernstein told sister title Real Estate Capital it had planned to enter the European real estate lending space for several years. “[We] passed on numerous team lift-out and acquisition opportunities. Partnering with Lacarne afforded a rare opportunity to join forces with a seasoned team offering an impressive track record and first-hand experience building a successful European private debt business.”
It added that current market conditions played a role in the timing of the strategy: “Dislocation in the market today will create a particularly opportune environment for launching the new business.”
The European real estate debt business will fit into its Private Alternatives platform, which consists of $18 billion in capital. The platform’s growth is among AllianceBernstein’s strategic priorities.
The European Commercial Real Estate Debt business will originate loans but can also participate in loans written by other lenders. It is understood to have two pools of capital: a whole loan and subordinated debt strategy targeting mid-single digit returns, and a higher-yielding opportunistic strategy through which it will target low double-digit returns. It is targeting lending opportunities in the UK and continental Europe, with a size range of €25-€150 million, but a likely average deal size of €50 million-€70 million.
Further down the line, AllianceBernstein is likely to raise capital for a mix of commingled funds and segregated accounts. The firm has been a real estate lender in the US since 2013, where it manages $6 billion of investor commitments.
Coffee will serve as chief investment officer and will be joined by Shivam Rastogi, former head of Deutsche Bank’s debt origination and high yield lending business in Europe, and Daniel Stengel, previously general counsel of Tyndaris Real Estate. The team will be based in London and Frankfurt.
“We have secured a great partner in AllianceBernstein,” commented Coffee. “Their ability to raise significant capital in the midst of a global pandemic speaks for itself.”
In its statement to Real Estate Capital, AllianceBernstein said: “Most of the US business’s capital comes from European institutional investors, who continue to express appetite for complementary investment strategies in Europe.”
AllianceBernstein is not the first US manager to enter Europe’s real estate debt market since the beginning of the covid-19 crisis. In October, Atlanta-headquartered Invesco Real Estate acquired the commercial real estate debt finance business of Swiss asset manager GAM, with $300 million of assets under management.
Prior to launching Lacarne, Coffee, a former Deutsche Bank real estate banker, led the property lending strategy of Tyndaris. The alternative investment advisory firm was founded in 2013 and focused on mid-market European real estate lending, ranging from €15 million-€100 million in senior, whole loan, mezzanine, and preferred equity transactions. The firm closed its first and second real estate debt funds on €350 million and €230 million in 2015 and 2017, respectively.
In December 2019, alternative investment platform Tyrus Capital, founded in 2009 by ex-Lehman Brothers executive Tony Chedraoui, announced the acquisition of Tyndaris in a deal that nearly doubled its assets under management to $2 billion.