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| "We did the deals before, at banks. Robert and I thought why not do the same again – just not in a bank?" Robert Palache |
These two experienced real estate financiers have formed a team to help fill the void left by the dislocation in the European real estate banking market.
Bell has worked at UBS, Merrill Lynch and Barclays Capital in the real estate and infrastructure sectors. Palache is a veteran of the European securitization market, working in senior roles at Nomura, Barclays Capital and Morgan Stanley covering a wider range of asset classes, markets and jurisdictions.
As banks delever their balance sheets and strain to cut costs, the European market has been severely affected by the fact that banks aren’t working with borrowers any more.
The most obvious problem is that the biggest financial institutions have billions of hung commercial real estate loans on their balance sheets. Banks are unable and unwilling to provide bridge financing for real estate projects because their primary exit strategy, CMBS, is broken.
"We did the deals before, at banks. Robert and I thought why not do the same again – just not in a bank?" says Robert Palache.
This development has some similarities with the growing trend of agency brokers. Capital is not an imperative for these new style intermediaries where longstanding relationships and a full understanding of client needs are the driving force.
Bell and Palache say that there are investors out there who have money to put to work but the opportunities to do so are few and far between. In addition to investment banks’ limited balance sheet availability and parlous capital positions, cost-cutting measures have removed many of the most senior knowledgeable bankers from their desks.
"The work of structuring and documenting a deal to meet both borrower and lender requirements used to be done by teams working inside banks. Those teams are gone. So there’s a whole key workstation missing. There are deals out there and there is liquidity but the two sides of the equation are not talking to each other in a rational and meaningful way," says Palache.
Bell Capital Partners’ business strategy will utilize the partners’ extensive contact base, both with potential issuers and investors. Having handled billions during their long careers, the duo believe that they are well suited to make use of the skills and techniques they have developed in their careers in banking and law.
They aim to arrange investors – including private equity, investment managers and sovereign wealth funds – into syndicates providing the same type of service they would typically receive from a bank, such as cashflow models and information memoranda.
Bell Capital is targeting mezzanine debt, hybrid capital and equity for real estate assets across Europe – but especially France, Germany and the UK. They also expect to access senior debt capital among their specialized investor base in addition to more traditional bank lenders.
The fees charged will probably range in the 1% for senior, 2% to 4% for mezz and 3% to 5% on equity capital. With deal sizes expected in the €250 million to €1 billion range, it will take only a modest amount of deals for the partnership to be successful.
Some wonder if this type of business model could work in fields other than real estate. Two obvious areas for potential exploration are infrastructure and leveraged buyouts.
Bell Capital has agreed with Freshfields Bruckhaus Deringer that it will be its legal partner.