Aalto Invest has recruited veteran Royal Bank of Scotland real estate banker Stephen Eighteen as head of origination, as the independent real asset and credit investor steps up its senior lending ambitions.
Eighteen joined this week, after leaving his head of non-core real estate role at RBS at the end of October, with a remit to widen Aalto’s European senior lending programme across three strands: club deal participation with debt funds, insurance lenders and bank; syndication; and direct borrower origination.
Aalto, founded by former Morgan Stanley bankers Mikko Syrjanen and Petteri Barman in early 2011, has raised £700m of capital from a group of European pension funds, which is seeking a weighted return across its European senior loan book of LIBOR plus circa 350 basis points.
So far Aalto has deployed around £100m across three syndication participations: Morgan Stanley’s £190m senior loanfinancing Blackstone’s Adelphi purchase; Deutsche Bank’s £65m senior loan financing Blackstone’s of Lacon House; andBank of America Merrill Lynch’s £350m refinancing of four UK shopping centres owned by Intu Properties.
In addition, Aalto is close to taking a circa £20m position in a senior loan, secured by a regional retail property.
This leaves Aalto with around £600m left to deploy, for which Eighteen is now in charge of overseeing the origination, alongside portfolio managers, Syrjänen and Matthew Pritchard.
Aalto’s sweet spot is for senior loans up to 70% LTV, at between £20m to £60m, which command between 250 and 450 basis points, secured by typically opportunistic assets in London and large cities in Northern Europe, particularly in the Netherlands, Scandanavia and France.
The majority of Aalto’s lending appetite, however, will be focussed on the UK, with a geographic concentration likely between 70% and 80% for the total loan book.
Aalto’s investor capital commitment includes separate pools denominated in euros and sterling, with one of its mandates reflecting the equivalent number in either currency.
While Aalto stresses its deployment period is not time-sensitive, the senior lender is keen to accelerate deployment over the next six to 12 months before returning to its underlying pension fund investors for additional capital.
Aalto hopes to capitalise on its flexibility on risk, speed of execution, and borrowers continued preference for debt source diversification to win deals.
Given Aalto’s capital is sourced from pension funds, is not required to comply with onerous capital treatment for lending which bank are, namely the FSA-imposed controversial “slotting” regime and Basel III.
Eighteen, who was succeeded by Paul Sullivan at RBS, brings more than 25 years’ experience in the commercial real estate finance industry, including playing a lead role in managing RBS’ vast real estate balance sheet deleveraging, across 13 countries, approaching £40bn since 2009.
Mikko Syrjänen, managing partner at Aalto, said: “We are delighted to welcome Stephen into the business. He brings a wealth of experience and long standing relationships in the industry, which will accelerate our strategy in developing Aalto into one of the leading non-bank lenders in the European real estate market”.
Last year Aalto, which has offices in London and Switzerland, hired former CEO of Morgan Stanley’s investment management business in Europe and Asia, Robert Sargent, as executive chairman to run the day to day business and operations of the firm.
European senior lending is one of a two-pronged business model adopted by Aalto, with the second focusing on the recovery in the US housing market through a part-built US single-family direct portfolio, with an ambition to build a 2,500 strong portfolio with a planned end value of around $360m.
Co-founder Barman runs the US direct portfolio, while Syrjanen manages the senior commercial mortgage lending business.