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Benson Elliot and GEM Realty Capital acquire mezzanine loan on German hotel portfolio
€42.5 million transaction highlights growing opportunity in discounted property debt
21 July 2008 — Benson Elliot Capital Management (“Benson Elliot”) and GEM Realty Capital, Inc. ("GEM") announce the acquisition of a €42.5 million performing mezzanine debt tranche (the “Loan”). The Loan was priced at a discount to face value and is secured by a portfolio of hotels and other assets located in Germany (the “Portfolio”).
The Portfolio, majority owned by certain real estate funds managed by an affiliate of Blackstone Real Estate Partners, consists of sixteen assets in Germany, including ten hotels. Approximately 50% of the Portfolio by value is situated in Berlin, and includes such flagship hotels as the Westin Grand and Park Inn Alexanderplatz in Berlin, and the Westin Bellevue in Dresden. The Loan secured by the Portfolio was performing at the time of acquisition and in compliance with all covenants.
Over the last fifteen years, GEM has been an active investor in discounted and distressed debt during periods of capital market dislocation. This is the first discounted debt investment by Benson Elliot, although members of the company’s team have been active in the origination, acquisition and management of performing and non-performing loans across Europe since the early 1990s. Benson Elliot has also recently reviewed numerous similar opportunities since the onset of the current capital markets turbulence.
GEM and Benson Elliot were able to effectively source, underwrite and close this transaction quickly given their established relationships with financial institutions and global hotel management companies. In addition, Benson Elliot’s experience investing in the German hotel sector aided in the quick assessment of the underlying asset fundamentals.
Marc Mogull, Managing Partner at Benson Elliot, commented: “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. Our ability to evaluate and close deals quickly will give us a competitive advantage.”
Barry Malkin, Senior Managing Partner at GEM, stated, "During this current liquidity crisis, we have been actively screening and analysing potential debt investments that can meet our risk/return profile. We are optimistic about this high-yield debt investment that is secured by an excellent portfolio of assets and has a strong sponsor in Blackstone. We are pleased to partner with Benson Elliot that has particular expertise in the German property market."
Benson Elliot was advised on the transaction by Deloitte & Touche and Travers Smith. GEM Realty Capital was advised by Mayer Brown LLP.
FOR FURTHER INFORMATION
ABOUT GEM REALTY CAPITAL, INC.
Founded in 1994, GEM Realty Capital, Inc. is a Chicago-based real estate investment company that invests in private-market and publicly traded real estate through two lines of business, GEM Realty Properties and GEM Realty Securities. Through GEM Realty Properties, GEM sponsors private equity real estate funds that invest directly in properties and loans. Through GEM Realty Securities, GEM manages a series of long-short real estate hedge funds that invest in publicly traded real estate securities, including REITs, real estate operating companies, homebuilders, and fixed income. GEM has over $2.5 billion of real estate assets under management on behalf endowments, foundations, pension funds, insurance companies, financial institutions, and private clients.
ABOUT BENSON ELLIOT
Benson Elliot was founded in 2005 by Marc Mogull to realise a vision for successful real estate investing in a changing market environment. Conceived alongside a group of leading institutional investors, the firm is dedicated to delivering sustainable investment out-performance through market cycles. The firm launched fundraising for its inaugural investment vehicle, Benson Elliot Real Estate Partners II, L.P., in April 2006, closing in August 2006 with subscriptions of more than €335 million. All funds managed by Benson Elliot are fully discretionary.
Mr. Mogull, one of Europe’s top investment professionals, was previously Managing Director and the senior real estate executive at Doughty Hanson & Co Limited. At Doughty Hanson Mr. Mogull established and ran the $632 million (equity) Doughty Hanson & Co European Real Estate Fund, one of the first and, to date, one of the most successful private equity real estate funds in Europe.
Benson Elliot’s activities are directed by a team of senior professionals experienced in sourcing, underwriting and managing real estate investments across Europe and across all major property sectors. Highlighting the firm’s success in fund-raising, team-building and investing Private Equity Real Estate named Benson Elliot “European Emerging Firm of the Year” for 2006. In 2008, Private Equity Real Estate again recognised Benson Elliot, naming the firm as one of ten emerging managers globally it expects “to shape the private equity world around them.”
ABOUT BENSON ELLIOT REAL ESTATE PARTNERS II (“BEREP”)
BEREP invests in real estate assets across Europe that offer the potential for superior risk-adjusted returns through active and innovative investment management. It acquires completed properties, as well as funding development, primarily in the UK, Germany, Scandinavia, Italy, France, Spain and central and eastern Europe. All managed funds are fully discretionary.
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