What Cain Hoy looks for in a real estate sponsor

Cain Hoy has been making the headlines during a busy few months for the real estate capital provider, supplying financing to one of India’s largest real estate companies and one of London’s best-known developers.

The two deals, struck in April and May, accounted for more than £740 million ($955 million; €852 million) in debt financing.

Canary Wharf Group received £450 million for the development of its office complex One & Five Bank Street. Cain Hoy also provided financing to Lodha UK, the UK arm of Indian real estate giant Lodha Developers, to the tune of £290 million. That loan is being utilised in the development of a residential block in Lincoln Square, London (pictured).

“These two deals have a lot in common,” Matteo Milan, director at Cain Hoy, tells PDI. “They both meet what we’re looking for when we source deals in the market.”

Both Canary Wharf and Lodha represent “strong sponsors”, he adds, noting this is usually a prerequisite to Cain Hoy providing financing.

As far as the Lodha deal is concerned, Milan says his firm had been in contact with the sponsor years before it provided the recent financing. “We met them from the very beginning,” he says, adding that Cain Hoy interacted with Lodha when it was exploring the UK market in 2013. “We met them, we introduced them to some players and then they began acquiring a site.” Prior to the recent financing provided to Lodha, Cain Hoy extended an £80 million bridge loan to the developer in October 2016.

Cain Hoy was attracted to both deals due to the strong number of pre-sales and pre-rentals agreed by the two developers. For Canary Wharf, Milan says his firm was lured by a significant lease entered into by a major bank. “There is a fantastic pre-let to SocGen,” he says, adding he doesn’t think the UK’s impending exit from the European Union will impact the property. “It’s a pre-let on a very long lease. We don’t think the banks will move overnight to another EU location because of Brexit.”

Additionally, Lodha’s residential development, which was launched in May 2016, has seen approximately £130 million in pre-sales. The developer has attracted some sales from domestic buyers, but also a large number from international buyers, Milan says.

In general, pre-sales are important, Milan adds, when Cain Hoy is looking to provide financing. “It’s always a good sign of a developer that has a sound business plan,” he adds.