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Pricoa enters European senior lending with maiden £70m UK loan

By James Wallace - Monday, June 25, 2012 15:41

Pricoa Mortgage Capital, the commercial mortgage lending business of Prudential Financial, has closed its maiden UK commercial property loan, a £70m refinancing for O&H Group over an 11-year term, with ambitions to lend £325m this year.

The debut UK property loan is secured by a five-strong portfolio, comprised of four multi-tenanted office properties in central London and a grocery-anchored retail property in Bath.

Pricoa’s first European commercial real estate loan, since opening its London advisory office in January, is part of a wider strategy to lend £325m (€400m) this year on a long-term, fixed-rate basis through what the insurer considers are Europe’s “gateway cities”, including in London, Paris, and the major cities in Germany.

The US insurer has an ambition considerably beyond its stated 2012 target, “if the right deals come along we will happily lend more”, David Gingell, associate of European Debt Originations at  Pricoa told CoStar News this afternoon.

Pricoa’s will lend from £30m, but its sweet spot is between £70m and £100m on good stabilised real estate over five to 15 year durations at between 60% and 65% LTV.

All Pricoa’s capital is seed capital from its underlying parent real estate company, with investments deployed on a liability-matching basis. Pricoa will not consider loan-on-loan financing.

Pricoa’s European programme is similar to the loan structures the company offers in the US, and as in the US, there is the ability to fund individual transactions of significant size.

All debt will be denominated in local currency and secured by income-producing real estate.  Initially the company is focusing on office, logistics, multifamily, and retail properties.

On the Continent, Pricoa’s will take part in bank syndications.

Thor Orndahl, a managing director who oversees Pricoa’s non-US mortgage platform, trailed the plans at last year’s GRI conference in May 2011.

“The diversification we can achieve by investing a portion of our portfolio outside of the US, whether it’s Europe, Japan, or Mexico, is very valuable,” he said in a statement today.

“The current market dislocation has provided the opening we have been looking for, and our plan is to be active in Europe for many years to come.”

O&H Group is a family-run business with more than £600m in real estate holdings and development projects throughout the UK.

Drew Abernethy, head of European origination advice at Prudential Financial, said: “Pricoa is very pleased to have closed this first transaction so soon after introducing its European programme. It illustrates the strength of the Pricoa platform globally, a commitment to Europe specifically, and an earnest belief that clients like O&H should have access to the type of long-term financing that they want.”

Gingell and Abernethy run the Pricoa’s London office, which is likely to expand in line with its business.

David Gabbay, chairman of the O&H Group, said: “We have been extremely impressed by the way the Pricoa team understood and accommodated our long-term business requirements and we are delighted to be involved in their first European transaction. We look forward to building on this relationship.”

Pricoa Mortgage Capital Company has $72bn, in assets under management and administration, and $68.8bn in its loan servicing portfolio as of March 31, 2012.

Prudential Financial operates under the trade name of Pramerica Financial.

jwallace@costar.co.uk