Benson Elliot, GEM buy €42.5m debt tranche

The London and Chicago-based real estate investment firms say pressure is mounting on banks with unwanted loan positions as exit routes dry up. The mezzanine debt tranche acquired by the firms is backed mainly by hotels in Germany managed by Blackstone funds.

London-based Benson Elliot Capital Management and Chicago’s GEM Realty Capital have acquired a €42.5 million ($67 million) performing mezzanine debt tranche in Europe.

According to the two firms, the loan was priced at a discount to face value and is secured by a portfolio of hotels and other assets located in Germany that an affiliate of The Blackstone Group manages.

The portfolio is majority owned by real estate funds managed by an affiliate of Blackstone Real Estate Partners, the firms said, and consists of 16 assets in Germany, including ten hotels.  Approximately 50 percent of the portfolio by value is located in Berlin, including the Westin Grand and Park Inn Alexanderplatz. The loan secured by the portfolio was performing at the time of acquisition, the firms added.

This is the first time Benson Elliot’s fund has invested in discounted debt, though members of its team have been active in the origination, acquisition and management of performing and non-performing loans across Europe since the early 1990s.

Marc Mogull, managing partner, said in a statement: “Since the onset of the credit crunch, banks have found themselves with large unwanted loan positions as their CMBS and syndication exit routes have dried up.  As pressure mounts to reduce these exposures, and it becomes clear to all that pricing of these positions is not going to improve in the short-term, similar opportunities will be created.”