Separation from troubled parent General Motors has given the property bank the backing of a new owner and a credit rating with which to pursue assets in Germany and eastern Europe
The announcement of the sale and rebranding of GMAC Commercial Mortgage, now 78% owned by private equity group Kohlberg Kravis Roberts and soon to be know as Capmark Financial Group (see box), must have been accompanied by the sound of popping corks at the company’s London offices in St James’s Square. At a stroke the directors picked up an investment-grade credit rating and 4% of the company.
For parent company General Motors, the sale was part of its wider rescue package. For GMACCM it was the opportunity to rebrand the company, which will adopt its new name later this quarter, and to move away from the junk bond status it has struggled with since General Motors’ downturn in fortunes started to drag the group down.
Andrew Haines, managing director of European real estate finance, says: “The sale of the controlling interest was very good news for us as it enables us to get independent ratings from the three major credit rating companies and gives us much greater access to capital.”
A newcomer in Europe
GMACCM is a relative newcomer in the UK and continental Europe. It was set up in the UK four years ago by Steve Williams from the bank’s US head office. Martin Wheeler and Kevin Cooper were promptly recruited from HBoS, followed last year by Steve Machin. Since its launch the company has built up a £500m (€725.5m) loan book on its balance sheet and in the UK writes around £1bn (€1.45bn) per year of senior and mezzanine debt, most of which is then securitised. The UK team has 11 staff.
The continental European arm is younger still, having been set up in June last year. It is headed by Haines, who moved with Sam Mellor and Bob Reid from ABN AMRO to form the new arm. Haines says the approach of the team, which numbers eight, is more one of pure lending than investment banking. “We wanted to go and work somewhere that was a real estate house, rather than a pure investment bank,” he says.
The team took their experience of the German market, built up while at ABN AMRO, and used it as the starting point for GMACCM’s European business. The company’s clients include Dawnay Day, Edinburgh House Estates and Prime Commercial. “We have a pan-European programme, but the key for us is to follow experienced clients into markets where they have proved themselves,” says Haines.
Other key markets for the bank include Holland and Switzerland, with Hungary, Poland and the Czech Republic under consideration. Haines says he expects the company to break into the eastern European market within the next couple of months.
On the continental European side, Haines’ operation has carried out €500m of transactions since October and has mandates for another €800m of business. The target is to hit €1.5bn of lending per year by 2007, but Haines is confident that the company can hit that target this year.
The group has two further arms, GMAC Institutional Advisors, which works on equity investment, and its services arm, which administers loans and commercial mortgage-backed securities based on GMACCM transactions, as well as for Merrill Lynch, CSFB and JP Morgan. The services arm operates from Ireland, where the bank is registered.
In the UK, the company wants to move away from the standard market into slightly higher-risk, higher-margin business, where the bank perceives it can work with investors to achieve higher yields on investments.
Continental growth potential
But in mainland Europe, GMACCM’s view is that there is still another 12-18 months of pure growth in the market before the bank will have to look to more exotic investments to drive growth. Its lending split by sector is 70% to retail, 10% to residential, 10% to offices, and 10% to other property types.
Another area Haines is obviously proud of is the company’s ability to be nimble; most lenders take weeks to turn around a loan, but GMACCM can do it in days, he claims. “We have a short credit time line and a lot more flexibility,” he adds. “We like to understand our clients’ business rational rather than just seeing if it ticks the securitisation box.”
The company is not shouting about it, but now that the shackles are off in terms of ownership, and a management stake in the company provides an incentive for growth, the plan must be to go for expansion.
www.gmaccm.com
| Private equity firm drives GMACCM in new direction
In the past two months nearly all General Motor’s financial businesses have been spun off in an effort to prop up the ailing behemoth. GMAC Commercial Mortgage is to change its name to Capmark Financial Group, as a result of the $9bn (€7.3bn) sale of the company. Its direct parent, GM subsidiary General Motors Acceptance Corporation, sold 78% of the company to private equity group Kohlberg Kravis Roberts. Private equity houses such as KKR usually work to a three or five-year plan with an exit at the end through a flotation or private equity transaction. Expect a corresponding build-up in activity in UK and Europe as the bank works towards a sale. A week after the sale of GMAC Commercial Mortgage, 51% of GMAC was sold to a consortium of investors led by Cerberus Capital Management, for $14bn (€11.3bn). Another name change is likely as General Motors Acceptance Corp also looks to distance itself from its old parent company. |
