LaSalle Investment Management Inc. started lending to European real estate companies three years ago and said its loans outstanding will triple by the end of 2013 as the firm takes advantage of the banking industry’s retrenchment.
The amount of European property debt managed by the unit of Chicago-based broker Jones Lang LaSalle Inc. will probably climb to about 1 billion euros from 300 million euros now, said Claus Thomas, head of client services in the region at LaSalle Investment Management. That may rise to 5 billion euros in five years, he said in an interview in Munich.
“We expect to see a continually growing debt segment in our asset mix,” Thomas said. “We see this as a long-term trend.”
Non-banks such as insurance companies and asset management firms are increasingly making real estate loans as traditional lenders pull back to comply with Basel III regulations.
European banks, which have as much as 2.4 trillion euros of loans outstanding to property companies, will slash that volume by about 25 percent as they work to meet Basel III’s stricter capital requirements, Morgan Stanley wrote in March. The number of funds raising money for real estate lending in Europe rose 66 percent in the first six months of 2012 compared with a year earlier, according to research firm Indirex Ltd.
LaSalle plans to focus its investments on U.K. and German mezzanine debt next year and will target an annual income return of 7 percent to 9 percent, Thomas said. The company has a 300 million-euro fund invested in U.K. assets. Clients are likely to include European pension funds and insurers, he said.
LaSalle Investment Management has about 37.2 billion euros globally invested in real estate, with about 13.9 billion euros in Europe, according to Thomas. Most of its properties are stores, offices and hotels.