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This Debt Fund Manager Is Raising Capital For UK BTR

The new BTR scheme at Westfield Stratford will provide 1,200 new units.

A fairly regular complaint in the world of UK build to rent is that the amount of debt does not match the amount of equity targeting the sector. One debt fund manager is looking to capitalise on that.

Chenavari Investment Managers is looking to raise £350M for its third property debt fund, according to Real Estate Capital. The fund will have a mandate to provide loans to rented residential schemes in the UK, as well as student accommodation, predominantly in Spain.

“In the UK, the private-rented sector is unlikely to be affected by Brexit,” Chenavari partner Andrew Haines told REC. “The impact is that probably more people will rent rather than buy a property.”

Haines said in both the UK and Spain, around 20% of households rent properties, and over time this is likely to move toward the European average of 30%.

The fund has held a first close already and provided debt for two deals in the UK and one in Spain, REC said.

The fund is targeting returns of 10% to 15%. It will provide stretched senior and whole loans of £20M to £30M up to 80% loan-to-cost on development properties, which will equate to a loan-to-value of 60% on completed schemes. Its loans will typically be for three to five years.

At Bisnow’s BTR event late last year, Palmer Capital’s Alex Price and Invesco Real Estate’s John German said that while debt availability was increasing, lenders were still wary of lending to BTR schemes in the UK because the sector is still relatively untested.

That has led lenders with a higher cost of capital to target the sector. Alongside Chenavari, Goldman Sachs made its first loan to the sector this year with a £98M debt facility secured against a scheme in Birmingham.