Kennedy Wilson Targets $2.5B in European Real Estate Loans

Beverly Hills-based Kennedy Wilson is making a new bet on Europe. It's partnering with a European global financial institution to target the acquisition of €2 billion ($2.5 billion) of performing, sub-performing and non-performing loans secured by commercial and residential real estate in Europe, with a focus on the United Kingdom and Ireland, the company announced Monday.

Beverly Hills-based Kennedy Wilson will be undertaking a new framework with an undisclosed European global financial institution that will target the acquisition of €2 billion ($2.5 billion) of performing, sub-performing and non-performing loans secured by commercial and residential real estate in Europe, with a focus on the United Kingdom and Ireland, the company announced Monday.

“We believe the Eurozone banking sector will continue to present many attractive opportunities in the property space,” Mary Ricks, president & CEO of Kennedy Wilson Europe, said in a statement, “and Kennedy Wilson’s operating platforms in London and Dublin will enable us to identify opportunities for the framework.”

Kennedy Wilson will potentially act as the asset manager and/or master servicer with respect to assets acquired under the framework and will co-invest with its partner, along with other potential investors, in connection with assets acquired under the framework.

“We are confident in the long-term outlook there,” a company spokesperson told Commercial Property Executive, “and especially like Ireland because of the tax benefits, well-educated population and location of European headquarters of companies like Google, HSBC and Accenture.”

This isn’t Kennedy Wilson’s first move along these lines. In March, it announced a partnership with Fairfax Financial Holdings Ltd., of Toronto, to pursue acquisitions of European commercial real estate assets, including both loans and real property. The partnership was to focus initially on investments in the United Kingdom and Ireland, with Fairfax providing a €250 million capital commitment alongside a 10 percent co-investment from Kennedy Wilson. This platform followed on the companies’ fully invested $278 million U.S. real estate investment partnership.

Then, in early June, Kennedy Wilson and Fairfax Financial acquired the Alliance Building, a 210-unit apartment building in Dublin. The partners purchased the property for €40 million from Grant Thornton, which acted as appointed receiver on behalf of Ulster Bank. The building is part of the Gasworks estate, which comprises about 312,000 square feet of office, 16,000 square feet of retail and 645 residential units.

“Amidst a decline in overall European investment, crossborder acquisitions by global investors continue to increase on both a total and net basis,” according to the first-quarter 2012 edition of the “Europe Capital Trends” report from Real Capital Analytics.

The report noted that U.S. investors have been active sellers, but that acquisitions could increase over the coming year. In addition, loan sales by European institutions are said to “represent a thriving area of crossborder activity. U.S. equity funds dominate these purchases, totaling €7 billion to date.”