NBAD, British firm plan $500m real estate facility

Abu Dhabi: The National Bank of Abu Dhabi said on Tuesday that it plans to set up a joint venture fund with a target size of $500 million (Dh1.83 billion) with London-based Evans Randall to offer mezzanine investments in European real estate.

The joint venture will focus on the British and German markets and seek to capitalise on the growing gap in the capital structure of property investments between senior debt and common equity, NBAD said in a statement.

The joint venture will aim to pay annual cash returns of between 8-12 per cent to investors with projected internal rate of returns of between 15 and 20 per cent, it said.

"With Evans Randall as an active property investor and borrower in the European real estate market, the joint venture will have considerable knowledge of what other borrowers require," Akram Mark Yassin, senior general manager of NBAD's Corporate and Investment Banking said.

Due to the credit crisis, banks are lending only about 50 to 60 per cent of the property value, forcing borrowers to bring in equity which in most cases could be up to 20 or 30 per cent.

"That gap, which is the mezzanine, between equity and senior debt will be filled by us," said Yassin.

"We plan to go to the market shortly to raise capital from investors," he added.

Evans Randall, an investment banking and private equity group is a real estate investor in the UK and western Europe with an $8 billion portfolio.

"With increased conservatism on the part of banks in the short-to-medium-term and the longer term shift in regulatory capital aspects of such investments, ongoing opportunities are available for investors able to originate and provide such financing," said Michael Evans chairman and chief executive of Evans Randall.