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Private Debt Investor keynote interview: A sheltered niche

Private Debt Investor

Christian Janssen (Head of Debt), Christoph Wagner (Director of Debt Strategies) and Shawn Kaufmann (Director of Debt Strategies - Origination & Syndication) speak to Private Debt Investor about opportunities for investors within commercial real estate debt and our growing commercial real estate debt platform.

For investors looking to invest into private debt, commercial real estate debt is the avenue that many take their first steps down. And for those investors looking to explore further, TH Real Estate is tapping into a protected but higher yielding market niche. 

Few lenders have the real estate footprint of TH Real Estate, with £11.1 billion ($16 billion; €15 billion) in assets under management in the UK. Overlaid with slightly higher leverage and offering greater flexibility than traditional lenders, it can provide an attractive risk/return profile, setting apart the global investment manager’s inaugural UK Commercial Real Estate Debt Fund. 

Designed to capitalise on relatively limited bank funding sources for strong secondary and well-positioned regional assets, the TH Real Estate’s Enhanced Debt Fund originates whole loans (comprising both senior and junior debt) up to 75 percent loan to value (LTV). It also writes junior-only loans where attractive pricing exists and well-structured junior creditor rights are available.

A central part of its strategy is the syndication of the senior portion of select whole loans at tight spreads to traditional lenders, keeping hold of the junior portion which benefits from enhanced margins and retained underwriting fees.

While several managers have launched whole loan debt funds, there aren’t many who can deliver significantly higher returns than senior debt funds but with a relatively lower level of risk than mezzanine funds by investing in a more protected part of the capital stack.

“We are focused on current cash flow dividend investment and safety which could be considered ‘boring’ but on a relative value basis vis-à-vis fixed income products, or core unleveraged real estate, the fund is designed to provide an outstanding risk return profile. We’re targeting 6 percent plus income returns which is a challenging goal but our investment strategy is unique and focused enough that we can achieve these sort of enhanced returns,” says Christian Janssen, head of debt at TH Real Estate
and the fund’s manager.

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