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GAM Real Estate Debt

Reasons to Invest

Structural opportunity

Recent changes in the European CRE debt market, as banks retreat and the resulting funding gap is filled by alternative lenders, provide a compelling value opportunity.

Stable income

Direct lending strategies have gained in popularity due to the attractive level of secured income and substantial downside protection.

Attractive yields

CRE loans can offer attractive yields relative to other fixed income assets with a similar risk profile, and have historically performed well in comparison to direct property investments.

Diversification benefits

The pan-European market offers an expanding and evolving opportunity set, and investing in a broad pan-European CRE debt portfolio could be an effective diversification tool.

Our Edge

Specialist expertise

Deep experience in sourcing and executing loans across Europe, as well as strong industry relationships, put the team in a unique position to exploit CRE debt opportunities.

Pockets of value

Middle market lending and whole loans are targeted in overlooked areas of the pan-European CRE debt market, where risk/reward opportunities are strongest and higher premiums can be accessed.

Distinct investment style

A whole loans approach improves the origination pipeline and optimises returns, while direct origination allows control of pricing, structuring, terms and due diligence.

Stringent risk management

Three levels of risk oversight ensures each loan is sound, while lending across a broad spectrum of CRE sub-asset classes, geographies and sectors diffuses idiosyncratic risk.

Philosophy and Process

Investment Philosophy

Overlooked areas of the pan-European CRE debt market present pockets of value, and therefore provide an opportunity for better risk/return opportunities than the broader market. Direct loan origination enables control of all aspects of loan structuring and improved deal flow. A whole loan approach enables the creation of well-designed loan structures, with flexibility when building portfolios. Lending across a broad spectrum of CRE asset classes, locations, countries and loan types means the inherent idiosyncratic risks of individual properties, sectors and markets can be diffused and the risk/return profile of the portfolio can be tailored.

Investment Process

The team’s industry reputation and established relationships enable them to source a strong pipeline of potential deals. They conduct structured, in-depth due diligence to mitigate borrower and property risk, and to decide upon the optimal loan structure. New loans are subject to unanimous Investment Committee approval, and an efficient underwriting and loan negotiation process is then undertaken, focusing on efficient borrower communication to set mutually agreeable terms. Following loan execution, risk monitoring enables regular reporting and early intervention by the team, the Investment Committee and the Valuation Committee. By managing each incremental risk and holding a diversified portfolio of loans with conservative covenants, the team reduce aggregate portfolio risk.

1. Source borrower

  • Prospect summary
  • Pipeline review

2. Conduct due diligence

  • Indicative and committed loan terms
  • Investment recommendation

3. Execute loan

  • Loan funding
  • Unanimous loan approval

4. Monitor and manage loan

  • Transparency
  • Ensure compliance with valuation policy

Investment Team

Martin Farinola and Andrew Gordon jointly manage GAM’s real estate debt team. They have an average of 23 years’ experience managing the origination, underwriting, execution and management of CRE loans across a broad range of CRE collateral types.

The wider team comprises seven investment professionals who have relevant and varied CRE debt experience. The team is backed by an Investment Committee and a Valuation Committee who approve key decisions and assist in risk management.

The team joined GAM in October 2015 from Renshaw Bay, an alternative lending specialist manager. The success of their whole loan approach is proven by their strong track record. In 2015, the team was named UK CRE Debt Manager of the Year at the Professional Pension Investment Awards.

Key Characteristics

A mortgage on the underlying property

Highly customisable, secured instruments

Lack of secondary market liquidity

(i.e. buy and hold investments)

Modest average life profile

(4 - 5 years)

Benefit of an industry-standard security package

Quarterly income distributions

May provide a level of protection against property value declines

Resources

Fund Profile - GAM Real Estate Debt

Risk management at GAM

Contacts