Arrow targets development lending market through Maslow stake purchase

The alternative asset manager said investing in the UK specialist lender will accelerate its growth ambitions.

Arrow Global, an investor and asset manager in credit and real estate, has announced the acquisition of a “significant minority stake” in London-based specialist development lender Maslow Capital, in a deal it said will accelerate Maslow’s growth plans.

UK-based Arrow, which has a background in buying and managing secured and unsecured loan and real estate portfolios, said the deal will enable the Maslow leadership team to capitalise on opportunities to finance real estate development in its existing market, the UK, plus other European markets.

“Our decision to acquire this stake is consistent with Arrow Global’s strategy of expanding capital light revenues in attractive segments of the credit and real estate space where we can raise and deploy third-party capital effectively, delivering sustainable market-leading returns,” Zach Lewy, group chief executive of Arrow, said about the deal.

Lewy added that Arrow intends to help Maslow grow its funding capabilities, launch new products and expand into more geographies. As part of the deal, Lewy will join the Maslow board.

Maslow was launched in 2009 as an unregulated fund focused on mezzanine lending, with the intention of providing loans to developers and banks to enable the completion of part-built UK residential schemes in the wake of the global financial crisis. In the following years, it broadened its product range to become a provider of development loans in the UK ranging from £15 million ($20.45 million; €18 million) to as much as £150 million. Its focus is residential sectors including purpose-built student accommodation, co-living, build-to-rent and retirement living.

Arrow’s investment is not the first time Maslow has attracted the interest of an external investor. In 2016, it established a partnership with San Francisco-headquartered investment business Sixth Street, through which it has funded more than £2.3 billion of real estate projects. In 2020, it partnered with M&G Investments and subsequently funded £250 million of projects.

In a joint statement, Marc Rose and Ellis Sher, Maslow’s chairman and chief executive respectively, welcomed the investment by Arrow. “Zach and his team have built an impressive and highly innovative investment business and we look forward to working together and leveraging their experience to build Maslow into a leading provider of pan-European real estate finance,” they said.

Several of the UK’s specialist real estate lenders, which have in the main emerged since the global financial crisis, have attracted third-party backing for their strategies, which typically involve writing small-ticket and mid-market loans.

On 11 January, London-based Octopus Real Estate, a specialist lender focused on the UK residential, commercial and development sectors, announced a funding agreement with Florida-headquartered investment manager Bayview Asset Management, which focuses on investments in mortgage and consumer credit. Through the partnership, in which an initial £450 million was committed, Octopus will originate two- to five-year senior investment loans in the UK commercial real estate market, in loans up to £25 million.

According to Benjamin Davis, chief executive of Octopus Real Estate, the deal demonstrates the “excellent range of opportunities available for local and international institutional investors to participate in the UK real estate market”.

This article first appeared in affiliate publication Real Estate Capital Europe