Aeon Investments, the London-based credit-focused investment company, has closed its first commercial real estate CLO warehouse in the UK, backed by three strategic loan agreements totalling £900 million.
The new investment is the continuation of Aeon Investments to grow its private credit business, according to the information shared by the communication company, Perception A. Loans will be funded through Aeon’s balance sheet and a three-year revolving senior warehouse facility provided by Credit Suisse. Aeon expects to issue three CLOs over the next two to three years and will be the biggest of their kind seen in Europe to date.
A collateralized loan obligation is a type of structured credit product increasingly common in the US that, until the issuance by Starz Realty Capital in Q4 2021, had not been used in European commercial real estate since the global financial crisis. It provides investors with a more liquid alternative to the commercial real estate loan syndication market.
Aeon’s recent agreements with WayPark Capital, a newly launched commercial real estate lending platform, private bank Arbuthnot Latham & Co, and specialist SME finance platform Assetz Capital, expands its commercial real estate investment programme, which launched in Q4 2021.
The originators will provide commercial real estate borrowers with tailored loans and financial solutions of between £2 million and £20 million with LTV ratios of up to 75% for acquisitions, refinancing, and asset upgrades across the UK, including offices, industrial units, warehouses, and some retail properties
Oumar Diallo, CEO of Aeon, said: “We are delighted to be working with our new partners as we build solutions for investors to access private credit in the UK. With the experience and performance of our CLO platform, we believe our disciplined investment approach will continue to deliver best-in-class returns for our stakeholders and broader CLO investors.”
Aeon is using its own proprietary ESG positive screening methodology, based on 13 equally weighted factors, to assess new loans and track their progress against measurable KPIs while assessing the impact of each initiative.
Ben Churchill, COO of Aeon, added: “While interest rate hikes and inflation are typically unwelcome news for fixed-rate bonds, floating-rate assets become more appealing to investors in such an environment, which act as an inflationary hedge. Despite the depressed credit markets, we believe structured credit products generally have the fundamentals to absorb recessions and have historically performed better than other private and public asset classes. We are confident investor demand for this type of asset-backed security will remain buoyant.”
The commercial real estate market in the UK saw £49.8bn of new lending in 2021 alone, and market factors indicate there is likely to be continued demand for such originations despite the macro environment. A significant portion of this is expected to be driven by non-bank lenders as banks retrench due to the high-interest rate environment.
With tighter lending standards imminent with various economic and interest rate pressures growing, the space looks likely to continue its post-2008 trend of moving away from being mainly served by banks as non-bank lenders with less capital-intensive loan books, and less rigid lending standards are better able to react to the shifting market environment.
Richard Thompson, Partner at PwC said: “It is clear that both lenders and investors acknowledge the need to first navigate the current market and macroeconomic challenges in the UK including interest rate rises, cost of living, supply chain pressures and rises in inflation. Any growth in new lending is expected in the short term to be driven by those lenders that focus on lending that is aligned to the level of risk observed in the commercial real estate market.”
Deutsche Bank alumni Oumar Diallo and Ben Churchill founded Aeon and are backed by shareholders including Juan Ball and Federico Hermida of US based, ABS Capital Company, the Gottschalk family through their multi-family office Vedra Partners, and Edward and Harry Lawson Johnson, two co-founders of Alvarium Investments, which recently announced a merger with Tiedemann Group.
Aeon’s high-profile list of Board Advisers and Non-executive Directors, including Nina Shapiro, who has held senior management and operating roles at The World Bank Group, sits on the Boards of HSBC Global Asset Management and served as Independent Non-Executive Director of Man Group Plc from 2011 to 2018, and Soroosh Shambayati who was most recently co-Head of Global Markets at Renaissance Capital and formerly Global Chairman of Emerging Markets at Nomura International.
Aeon is a London-based credit-focused investment company. It originates, structures, and invests in long-term, income-focused investments on behalf of its stakeholders, families, foundations, institutions, and sovereigns.
Aeon employs a relative value fixed-income strategy and specializes in structured credit in segments that offer competitive returns on a risk-adjusted basis, specifically in the real estate, infrastructure, transportation, and private debt sectors.