Global investment management firm Barings has secured a new £250 million (c€288 million) debt mandate with the Phoenix Group, the UK’s largest long-term savings and retirement business provider, for its matching adjustment portfolio.
Barings plans to build a portfolio of investment grade, buy-and-hold UK commercial mortgage loan assets across a range of commercial property sectors, including industrial, residential and offices in Greater London and regional locations.
Real estate debt has been one of the fastest-growing property asset classes in recent years, to the point that it has been described as an “investment superfood” that can enhance portfolio performance. Experts say the surge in institutional interest in debt is set to continue.
The facilities in Barings’ portfolio will have a term of between five and fifty years and Phoenix will look to match the cashflows and duration of the assets against the profile of its annuity liabilities.
First deal already agreed on mixed-use property
Barings has already agreed its first deal for the new mandate, a £30 million first mortgage loan with a 30-year term secured against a mixed-use office and retail property on Tottenham Court Road in London. The LTV is below 50%.
“We are extremely pleased to be partnering with Phoenix as they build their exposure to this asset class,” said Sam Mellor, head of real estate debt, Europe and Asia-Pacific, Barings. “The insurance market is strategically important to our business and we have a long history of managing capital for insurers.”
The Phoenix mandate also aligns with Barings’ wider UK debt strategy targeting loan sizes of between £30 and £200 million and diversified geographically across the UK and by asset class, he said.
“As the banks retrench from the UK lending market, we continue to see a healthy pipeline of opportunities,” said Mellor. “We look forward to delivering strong returns to match Phoenix’s liabilities.”
It is the first UK real estate debt mandate for Phoenix. The group chose Barings because of its experience and expertise in this asset class, said James Mitchell, head of manager oversight: “We are looking forward to working with the team to help facilitate our growing needs in this asset class.”.