Venn Partners, an asset backed securities investor, has secured £500m in capital predominantly from cornerstone investor Siem Industries Group to originate European senior and mezzanine loans in new a subsidiary to be headed by former Citigroup managing director Paul House.
House, formerly head of EMEA Real Estate at Citigroup, is a founding partner of Venn Finance, which will seek to originate predominantly senior loans secured against UK and German commercial real estate on a risk-adjusted basis, with an appetite to lend in the 55% to 80% LTV range.
This is the first foray into real estate lending for Siem Industries Group, a diversified industrial holding companies with interests in a number of sectors, including oil service and shipping, which is seeking to capitalise on enduring credit opportunities arising from the continued restructuring of banking markets.
Venn Finance already has an active pipeline and is expected to close its maiden deal in the first quarter, while the entire £500m raised is targeted to be deployed by the end of the year.
In addition to direct lending from its own balance sheet, Venn Finance has a loan servicing platform enabling the new debt provider to “act as an aligned investment partner to support institutional investors in participating in the new credit opportunities emerging in the market”.
Venn Finance will be supported by Venn Partners’ structuring team and its proprietary credit analytics and risk frame work (VeRA), which is currently used to manage risk on over €3bn of asset backed securities, including a commercial-mortgage backed securities book.
House has more than 12 years’ experience in the European banking sector in origination, structuring and sales of over £10 bn of commercial real estate debt and assets in both private and public capital markets. Prior to his European experience, House spent over five years in the US real estate markets with Citicorp Real Estate in New York and Canada.
House, founding partner of Venn Finance, said: “I am delighted to be joining Venn Partners to lead our efforts to offer a competitive source of debt capital to our clients, in one of the most compelling investment opportunities in the European credit markets.
“The combination of a supportive shareholder in Siem, a best in class credit analytics and structuring team at Venn Partners and the market opportunity create a powerful combination that will facilitate my efforts to build a leading real estate financing franchise.”
Jonathan Clayton, managing partner of Venn Partners, said House is setting up Venn Finance to “establish a strong debt offering which addresses the clear credit dislocation within the commercial lending markets”.
Clayton added: “The systemic changes caused by bank de-levering and retrenchment provides an unparalleled opportunity for us to support our clients by offering funding solutions to borrowers and by acting as an aligned partner to a broad investor base.
“Paul is one of the finest real estate finance professionals in Europe with excellent track record in completing some of the largest and most sophisticated property transactions over the past decade and we are delighted to have him lead such a relevant and exciting business.”
Framing the credit opportunities in Europe, Venn Finance said that around 90% of outstanding commercial real estate loans in Europe are estimated to be funded by banks. As banks continue down the long unwinding road of legacy debt, it consequently creates cherry-picking opportunities for nimble new lenders with capital, platforms, and experience in loan origination.
“The existence and scale of the opportunity [in Europe] is highlighted by comparisons with the US, where only 55% of outstanding commercial real estate loans are estimated to be funded by banks,” argued Venn Finance.
In the UK, based on the latest figures for last year, there is an estimated £200bn of debt secured against commercial real estate – with banks’ balance sheets accounting for the vast majority of this. Some 70%, or around £140bn, of this debt needs to be refinanced by the end of 2016, which is creating significant pressures for both lenders and borrowers.