Byline: ARTHUR MACDONALD
MANAMA: Investing in property-backed mezzanine debt instruments in
the US offers particularly good returns at present, according to Bahrain-based Investcorp,
The asset management firm specialising in alternative investments,
yesterday held a knowledge sharing seminar hosted by Investcorp's
head of placement and relationship management James Tanner.
The theme of the seminar was "Real Estate Mezzanine Debt: An
Historic Investment Opportunity".
It focused on "mezzanine" finance, which is the debt
market in property between equity and senior debt.
"It is an increasingly important source of capital in US
commercial real estate acquisitions, development, and refinancings, as
well as demystifying the US real estate market by explaining the
different characteristics of the US residential and commercial real
estate markets," said Mr Tanner.
"In today's illiquid market, mortgage debt is difficult
to get, is expensive and comes with very onerous conditions.
"This has increased significantly the demand for mezzanine
debt. At the same time, high quality and sound performing commercial
real estate assets in distressed situations are becoming available at
"Under such circumstances, investing in commercial real estate
mezzanine debt can produce equity-like returns with significant downside
Mr Tanner said that mezzanine finance currently offered the level
of return associated with equity finance with the risk outlook of bonds.
Current returns on good investments opportunities were around 10
per cent annually with the possibility of an 18pc yield over the next
five to six years.
Investcorp's real estate department has a track record of more
than 200 debt and equity investments totaling over $10 billion and more
than 100 exits with aggregate value of approximately $4bn.
Investcorp Real Estate Mezzanine Fund I was formed in 2006 and is
fully deployed while Investcorp Real Estate Credit Fund I was formed in
2008 and $175 million has been deployed.
It currently has some $600m invested in the mezzanine debt in the
US market, the only property market it operates in.
"We favour the US market because of its scale opportunities
and the legal redress in Event of possible financial problems associated
with the debt bond,." Mr Tanner added.
Copyright 2009 Gulf Daily News
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