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National Bank of Abu Dhabi (NBAD) and Evans Randall, a London- based investment banking and private equity group specialising in alternative assets, have signed a memorandum of understanding to form a joint venture to provide mezzanine investments in European real estate.

The joint venture, which will have a target size of US$500 million (AED 1.84 Billion), will focus on the UK and German markets, and will seek to capitalise on the growing gap in the capital structure of property investments between senior debt and common equity. The joint venture will aim to pay annual cash returns between 8%-12% to investors with projected IRRs of 15%-20%.

The joint venture will provide mezzanine financing (which ranks below senior debt and above equity) filling the gap which has been created by the change in the banking market. These investments should deliver returns commensurate with their position in the capital structure (being higher than the senior loan return) and, whilst ranking above the common equity, may also have part of their return or “upside” linked to equity returns.

“With Evans Randall as an active property investor and borrower in the European real estate market, the joint venture will have considerable knowledge of what other borrowers require which, when combined with the undoubted skills and excellent reputation of the execution team, will be a strong competitive advantage,” said Mr. Akram Mark Yassin, Senior General Manager of NBAD’s Corporate & Investment Banking Division.

“The entrepreneurial approach which will form the basis of the joint venture will be a huge advantage. With the strong relationships Evans Randall has built over time, we anticipate numerous attractive opportunities that the joint venture will be able to take advantage of,” he added.

“With increased conservatism on the part of banks in the short to medium term and the longer term shift in regulatory capital aspects of such investments, ongoing opportunities are available for investors able to originate and provide such financing,” said Mr. Michael Evans, Chairman & Chief Executive of Evans Randall.

The joint venture strategy aligns closely with NBAD’s position as a first choice provider of sophisticated and tailor-made investment solutions. “This joint venture promotes our strategy of providing our investor base access to innovative and diversified investment products to complement their existing investment portfolios. It also provides NBAD access to an attractive and fast-growing sector of the European real estate market,” Mr. Akram Mark Yassin, Senior General Manager of NBAD’s Corporate & Investment Banking Division, explained.

The joint venture will leverage off the strong position that both partners have in their respective markets, with NBAD acknowledged as a leading bank in the UAE and GCC markets and Evans Randall a respected and experienced sponsor and investor in the European real estate market.

With this background, the joint venture will be extremely well placed to take advantage of the opportunities that are available to deliver sustainable and attractive returns to investors.

“The combination of NBAD’s market leading presence and our experience in both the structured finance and commercial property arenas will leave us extremely well placed to deliver value to investors,” Mr. Michael Evans confirmed.

“We are delighted to have established this joint venture with the National Bank of Abu Dhabi. Together, we will have significant firepower to take advantage of the increasing number of mezzanine opportunities we are seeing in the European real estate market,” said Mr. Andrew Haines, Managing Director of Evans Randall Capital Partners.

In the last four years Evans Randall has become a leading investor in prime landmark real estate assets in both the UK and Western Europe, having acquired a portfolio in excess of US$8 billion.

Its recognised track record in completing transactions quickly and effectively is fundamental to its credibility in the mezzanine and preferred equity markets and a core part of the joint venture’s offering.

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