The new real estate team at Credit Suisse First Boston in London has begun building a diverse portfolio of equity investment and debt financing in Europe
When Deutsche Bank took over Bankers Trust last year, three of the BT directors, Ian Marcus, Gary Wilder and Derek Vago, decided to jump ship and join the London office of Credit Suisse First Boston.
The team has grown to around 12 professionals and is working on a range of activities: equity investments in property companies; raising capital on behalf of clients through initial public offerings and rights issues; sale and leaseback transactions; structured finance; and securitisation.
Vago, a director and joint head of the new real estate investment banking group, says there is no cap on the amount of money CSFB wants to put into European real estate. Its deals done to date have all been financed from the bank’s own balance sheet; there is no immediate plan to launch a fund to bring in new investors.
“We have invested around $35m to $40m in the transactions we have done so far and are comfortable investing up to $75m in any given transaction,” comments Vago. This puts the bank’s focus on “niche operating companies, with strong local partners”.
The first transaction was an investment into the European subsidiary of US self storage company Shurgard Storage Centers. Signed last October, it saw CSFB and three other investors acquire a 43% share in Belgium-registered SSC Benelux, in exchange for €122m of fresh equity. CSFB also underwrote a €140m loan to fund the European expansion.
SSC Benelux increased the number of units in Europe from 20 to 30 by the end of last year, and is planning to open at least another 50 this year, says Vago.
CSFB is looking at a number of similar deals, with Germany and Italy the most likely countries where it will make its next direct investments. The bank is looking for “quality management, a growth story and a dominant market position”, says Vago, “or situations where restructuring is possible.”
On the equity capital markets side, the CSFB team completed its first rights issue last year on behalf of UK company Minerva, while the Madrid office of CSFB has been involved in raising capital for Spanish up-and-coming property company Prima. The real estate team is working on rights issues in three different Continental countries, and another in the UK.
On the debt side, a niche that the bank is looking to exploit is short-term bridge financing for some of the large corporate sale and leaseback transactions that are in the pipeline in Europe. It is working on one such transaction in Italy, hints Vago.
This is an emerging area of the market where CSFB hopes to stake out some ground. Ian Marcus brought with him from Bankers Trust the participation in Integrated Workspace Solutions, the consortium that is constructing an outsourcing deal with information technology company ICL.
And in December last year, CSFB arranged the sale and leaseback of 180 Shell petrol stations, with London & Regional Properties. Shell UK raised £300m through the sale, and agreed to take leasebacks for 18 years.
In 1997, it set up a joint venture with US entrepreneur Sam Zell called New Europe. This was dissolved following Zell’s decision to refocus his attentions on Asia.
And plans to invest in Europe through CSFB’s New York-based Praedium Funds were announced in 1998, but did not lead to any significant transactions. The strategy was abandoned last year, when the ex-Bankers Trust team came on board.
Credit Suisse First Boston
1 Cabot Square
Canary Wharf
London E14 4QJ
Tel 44 171 888 4690
Fax 44 171 888 4699
www.csfb.com
