Private Credit Market Surpasses $3trn AUM

• Industry-led research indicates that the global private credit market has surpassed US$3trn AUM with optimism about further growth prospects in core US, European and Asian markets.
• Corporate lending remains dominant with 60% of the overall AUM, while asset-backed, real estate, and infrastructure debt now account for 40% of the market.
• Economic stress on borrowers due to higher rates is reflected through an increase in adjustments to loan terms and valuations.
• Portfolio difficulties are likely near their peak and not distributed uniformly across the industry.
• Core financial stability metrics such as leverage and liquidity mismatches remain stable.

New industry research from the Alternative Credit Council (ACC), the private credit affiliate of the Alternative Investment Management Association (AIMA), finds that the global private credit market has reached US$3trn assets under management (AUM).

The 10th edition of Financing the Economy, published in partnership with EY, finds that corporate lending remains central to the asset class, accounting for around 60% of total AUM. Investors are also increasingly seeing value in asset-backed lending, real estate debt, and infrastructure debt strategies, which now comprise around 40% of the private credit market.

Private credit lenders invested US$333.4bn of fresh capital in 2023 – a significant increase on the US$203bn deployed in 2022 – with the largest managers responsible for 80% of the capital deployed. Both findings reinforce the trend of larger firms spearheading the sector’s growth and expanding role in global finance despite challenges in the broader economy.

The research finds that increased stress on borrowers during the past two years is being reflected in adjustments to loan terms and valuations reported to investors. There is a high level of transparency for investors regarding the status and performance of loan portfolios.

Financing the Economy 2024 shows a significant rise in loan term adjustments from, on average, 8% of loans in 2023 to a little under 12% in 2024 as lenders manage their loan books. These adjustments remain within forecast scenarios and are consistent with the proactive approach to risk management practised by private credit funds.

ACC data also shows private credit funds use modest leverage, with 51% employing between 0.1x and 1.5x of debt-to-equity leverage ratios, while 31% of funds are unlevered. Comparing this data with prior ACC research confirms that leverage used by private credit funds has remained consistent over the past 10 years.

Around 50% of respondents expect to increase their investment in the US, European and Asian markets over the next three years. Investors’ desire for diversification and ongoing bank retrenchment are cited as key factors supporting the demand for additional investment in corporate lending, ABL, RE debt, and infrastructure debt.

Jiří Król, Global Head of the Alternative Credit Council, said: “Surpassing $3 trillion in assets is a remarkable achievement for the private credit industry, especially in a challenging macro environment. Our research shows that private credit’s stability stems from its strong structural foundations – aligned interests between managers and investors resulting in robust long-term capital backing. The sector enhances financial stability through fund structures that avoid liquidity and maturity mismatches and consistently low levels of leverage. This makes private credit a resilient force in today’s financial landscape.”

Vincent Remy, EY Luxembourg Private Debt Leader, said: “Private credit has been the fastest-growing alternative asset class over the past two decades. The research shows that the sector continues its steady growth despite headwinds. Private debt markets also expand into new geographical markets and into a variety of new debt strategies. Whilst institutional money constitutes the main source of financing, retail and insurance capital have played a more significant role. The rapid growth has gathered increased attention from regulators, yet the sector continues to provide a vital source of alternative financing to the real economy which benefits both borrowers and investors.”

The research draws on data from 53 private credit managers and investors who collectively manage an estimated US$2trn in private credit assets.

The research also features contributions from 26 leading private credit fund managers including: Allianz Global Investors, Ares, Arkkan Capital, BlackRock, Blackstone Credit, Blue Owl Capital, Brinley Partners, The Carlyle Group, Cheyne Capital, CVC Credit Partners, Hayfin, Investment Management Corporation of Ontario, LBBW Asset Management, Man Varagon, MGG Investment Group, MV Credit, NEST, Oaktree, Park Square Capital, Pemberton Asset Management, Tikehau Capital, Apollo Global Management, ICG, Oak Hill Advisors, Orchard Global and Zenzic Capital.

Source: AIMA

Place-Based Impact Investing: defining additionality in affordable housing

Nicole von Westenholz, partner at Cheyne Capital, examines the standards an affordable housing investment needs to meet in order to deliver additionality.

It is generally accepted that ‘additionality’ – enabling positive outcomes that would not otherwise have occurred – lies at the heart of impact investing.  Within Place-Based Impact Investing (PBII), the creation of additional homes – and, in particular, additional affordable homes – may be cited as a measurement of additionality.  But are they always additional?

Any affordable housing that is mandated by planning consent under a Section 106 agreement is not additional as this will be delivered anyway.  By extension, buying existing portfolios of Section 106 housing is certainly not additional.  Note also that affordable housing mandated under planning regulations is seen by developers as a penalty on their returns and therefore usually built with cheaper materials and to a lower specification than homes made available at market rate.

We would argue that using Homes England grant funding to subsidise the delivery of housing by the private sector is also not additional as this grant funding has already been earmarked for housing creation and could be used elsewhere if not taken by private sector housing providers.

Tangentially, it should be borne in mind that, in most cases, Homes England grant funding can only be given to a Registered Provider (RP) – which has led to a flurry of new RPs being set up in order to be eligible to receive it.  However, when the grant-funded properties come to be sold, they can only be sold to another RP.  Given the relatively small pool of other RPs who will be able to buy and the downside scenario risk of a ‘rush for the exit’ in unfavourable market conditions, the exit risk from grant-funded schemes needs to be considered carefully.

By contrast, consider a model where the private sector landlord makes a proportion of its homes available at meaningfully discounted rents on a voluntary basis and still makes a healthy return on its investment.  This is pure additionality and leaves government grant available for the creation of further affordable housing elsewhere, especially in places where it would otherwise be unviable.

One such example is Cheyne Impact Real Estate’s award-winning Poplin development in Manchester.

The scheme comprises 144 one-, two- and three-bed homes at the intersection of New Cross, New Islington and the vibrant Northern Quarter.  All of the homes are ‘tenure blind’, meaning that they are identical in specification and service levels.  However, 51 of the homes (35%, which is above the Local Plan target of 20%) are allocated to local key workers at significantly discounted rents whereby their rental payments account for no more than 30% of their net disposable income.  In some cases, these discounts exceed the 20% discount that would be achieved under capital ‘A’ Affordable housing.

Yet, all of these affordable homes are provided by Cheyne on a voluntary basis as there is no planning-stipulated provision for affordable housing within the scheme.

The result for residents is a diverse, cohesive and, above all, inclusive community in a development which is ranked third out of 63 places to live in Manchester on Homeviews with comments such as “You literally become a part of a community that cares for all, environmentally, socially when you become a resident.”

The result for investors is a yield which would not look out of place amongst those of Build-to-Rent (BTR) schemes with 100% market-rate rent.  The ability to achieve this lies in the entry level at which you buy into the scheme, a tight control of development costs (helped in Cheyne’s case by an in-house development team) and low tenant turnover thanks not only to the discounted rents but also to capped rental increases for all tenants, regardless of tenure type.

Following the success of Poplin, Cheyne is now taking its thesis to Leeds where it plans to deliver up to 50% affordable housing (of which 20% is mandated and 30% voluntary) across 302 homes in a best-in-class, multi-family scheme called Mabgate Yard. Being a larger scheme, Mabgate Yard will include extensive amenities, such as a cinema and gym. It will target an EPC rating of A and Home Quality Mark of 4.5, making it one of the most sustainable BTR developments in the UK.

Fleet Street set for new student accommodation and cultural attractions

The City of London Corporation has approved plans to refurbish the building at 65 Fleet Street into a new mixed-use scheme, that will deliver a wide range of additional benefits for local residents, workers and visitors.

Currently an underused office building, the site will be retrofitted and transformed into a professionally managed, student living accommodation, with over 850 rooms, set near to the London School of Economics and Kings College London. At the ground floor level of the new building, a visitor experience area will be created to support public educational programmes, that will connect Fleet Street’s printing heritage to future generations.

With the support of the City Corporation and in keeping with its ‘Destination City’ policy, the developer team of Dominus and Cheyne Capital have designed the new cultural experience in partnership with the St Bride Foundation, a local institution and the historic home of print and type design on Fleet Street. Soon to be accessible to the public seven days a week, the St Bride Foundation has curated an internationally significant collection of materials, celebrating the history of print, graphic design and typography.

The proposals for the surrounding area include new public access routes and public realm improvements around the local Whitefriars Crypt which is, at present, largely hidden to the public and only accessible via appointment with the building management. It is all that remains of the 13th-century Whitefriars Monastery, once home to the Carmelite Order of the White Friars, who used to own a large stretch of land between Fleet Street and the river Thames.

NOW READ: Government budget offers ‘light at end of tunnel’, says acting council leader

Following the Planning Applications Sub Committee approval of the 65 Fleet Street proposals, there will be a number of public benefits, including a new pedestrian route through the heart of the historic sight and an enhanced courtyard space, that will enable inclusive access to and improved visibility of the crypt.

Public realm improvements as part of the proposals also extend to the continued refurbishment and extension of London’s oldest Irish drinking establishment, the Grade II listed Tipperary pub and supporting the local area by delivering vibrant active frontages onto Fleet Street and Bouverie Street.

Finally, in keeping with the City of London Corporation’s goal to reach net zero by 2040, 65 Fleet Street will achieve a BREEAM rating of ‘Excellent’, with the development itself seeing the vast majority of its structure reused and retained, whilst becoming far more energy efficient.

Chairman of the City of London Corporation Planning and Transportation Committee, Shravan Joshi, said: “Once completed, the refurbished building at 65 Fleet Street will boast some of the highest sustainability credentials in the City, whilst accommodating the world’s best and brightest students and opening up an inclusive, new cultural space from which everyone can benefit. A planning approach that favours retrofitting not only enables us to attract new demographics to recently restored, characterful buildings, but it also maximises the productivity of the Square Mile’s limited space and does so in a way that retains embodied carbon, improves operational efficiency and celebrates our old buildings.”

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Restaurant review: Despite a few service hiccups, Press Up’s new Pan-Asian spot shows plenty of promise

Our food critic predicts interesting things to come at this fun new city-centre restaurant

Whatever your feelings about the Irish hospitality group Press Up, which has recently been taken over by its major lender Cheyne Capital — and people do tend to fall into either the ‘love it’ or ‘loathe it’ camp — the news that Cheyne plans to focus on improving the food offering across its restaurants is welcome. Despite the photo opportunities presented by their shiny interiors, the eating at Press Up’s venues has rarely been memorable.

Kaldero, located in what was Wagamama on South King Street, is the first opening under the new regime. I hadn’t eaten in Wagamama for many years and don’t remember much about it, but it’s safe to say the premises has been transformed under the direction of architects O’Donnell O’Neill, also responsible for Mama Yo and Doolally, into a glamorous space with flattering lighting and comfy seating.

Restaurant review: Despite a few service hiccups, Press Up’s new Pan-Asian spot shows plenty of promise

Our food critic predicts interesting things to come at this fun new city-centre restaurant

Whatever your feelings about the Irish hospitality group Press Up, which has recently been taken over by its major lender Cheyne Capital — and people do tend to fall into either the ‘love it’ or ‘loathe it’ camp — the news that Cheyne plans to focus on improving the food offering across its restaurants is welcome. Despite the photo opportunities presented by their shiny interiors, the eating at Press Up’s venues has rarely been memorable.

Kaldero, located in what was Wagamama on South King Street, is the first opening under the new regime. I hadn’t eaten in Wagamama for many years and don’t remember much about it, but it’s safe to say the premises has been transformed under the direction of architects O’Donnell O’Neill, also responsible for Mama Yo and Doolally, into a glamorous space with flattering lighting and comfy seating.

Real Estate Credit Investments Understanding the Discount, Its Rise, and Future Prospects

Real Estate Credit Investments (LON:RECI) Plc is the topic of conversation when Hardman & Co analyst Mark Thomas joins DirectorsTalk Interviews.

In this interview, Hardman & Co Analyst Mark Thomas provides insights into Real Estate Credit Investments (RECI) Plc, examining recent changes in the company’s discount rate and the factors driving its closure. The discussion addresses the strategies implemented by RECI’s management, including portfolio adjustments and capital allocation measures, which have contributed to a more resilient positioning amidst evolving market conditions. Thomas also shares perspectives on market dynamics that have favoured RECI, the outlook for its continued performance, and potential risks ahead.

RECI is a specialist investor focused on European real estate credit markets, prioritising fundamental credit and value in its investment strategy.

Dividend stocks provide opportunities for shareholders to generate a passive income stream through dividend payments. In this article, we highlight five UK shares listed on the FTSE 250 and AIM segments of the LSE that have proven very reliable in delivering regular attractive high dividend yields. The PLCs are Duke Capital, Arbuthnot Banking Group, Diversified Energy Company, Real Estate Credit Investments and Fidelity China Special Situations.

Duke Capital Limited (LON:DUKE) is an AIM-listed provider of hybrid capital solutions for small and medium-sized enterprises (SME) business owners in the United Kingdom, Europe and North America, combining the features of both equity and debt.

In Duke’s recent FY ’24 results, it’s high-yielding dividend stood out. It paid investors 2.8 pence per share, which equates to an impressive 8.6% yield with the share price at 32.5 GBX on 2 April 2024. According to Hardman’s research, this was more than covered by free cashflow of 4.3 p/sh, recuring cashflow of 3.5 p/sh and adjusted EPS of 4.85p (up 55%).

Real Estate Credit Investments Limited (LON:RECI), a stable quarterly paying high dividend UK stock and specialist investor in the United Kingdom and Western European real estate markets with a focus on fundamental credit and value.

RECI paid four interim dividends of 3.0 pence per Ordinary Share (i.e. 12 pence per share in total) for the year ended 31 March 2024. This equates to a high-income yield of 10.4% at 31 March 2024.

Fidelity China Special Situations PLC (LON:FCSS), the UK’s largest China Investment Trust, capitalises on Fidelity’s extensive, locally-based analyst team to find attractive opportunities in a market too big to ignore.

FCSS has increased its dividend in every year since inception with the most recent annual dividend offering a historic yield of 3%. The trust was awarded Kepler’s Income & Growth rating for 2024.

Arbuthnot Banking Group PLC (LON:ARBB), trading as Arbuthnot Latham, provides private and commercial banking products and services in the United Kingdom. Arbuthnot Banking Group paid a total dividend of 46.00p (equating to a yield of 4.6%) for the financial year end 31/12/23. It has a current yield of 5.05% that is well covered by earnings.

iversified Energy Company Plc (LON:DEC) is a consolidator of mature natural gas producing assets in North America. It’s at the forefront of U.S. natural gas producers in its commitment to ESG goals and stewardship of its assets.

Hargreaves Lansdown states DEC’s dividend yield is over 26% based on its last reported annual dividend and its current buy price of 852.50 GBX. Diversified Energy has already declared two dividends of 29.00¢ each for Q1 and Q2 2024 payable in September and December 2024.

Dunas Capital Real Estate obtiene 45 millones de Cheyne Capital para el proyecto de Chiloeches

Dunas Capital Real Estate, el área de gestión de activos inmobiliarios del Grupo Dunas Capital, ha cerrado con éxito un acuerdo de financiación de más de 45 millones de euros con la gestora internacional de fondos de inversión alternativa Cheyne Capital Management (UK) LLP para el desarrollo del proyecto de Chiloeches.

Se trata de un préstamo para financiar la construcción de un edificio logístico de aproximadamente 49.000 m² sobre una parcela de 94.000 m², con capacidad de almacenamiento de productos farmacéuticos. El inmueble de última generación gozará del más moderno sistema de control de temperatura configurando tres cámaras de almacenamiento entre +15ºC y +25ºC, 3 cámaras para almacenamiento entre +2ºC y +8ºC, 1 cámara de frío negativo y una cámara bi-témpera. En total, el activo cuenta con un 69% de espacio de almacenamiento en frío, unos 1.350 m² de oficinas y 124 plazas de estacionamiento, incluyendo cargadores eléctricos.

Ubicado en el Corredor de Henares y con acceso directo a la carretera A-2, el edificio se encuentra en el corazón del centro logístico más importante de España. La ubicación permite acceso inmediato al área metropolitana de Madrid y ostenta una posición privilegiada para la distribución nacional, ya que se encuentra a tan sólo 45 kilómetros de Madrid. 

El desarrollo del proyecto en Chiloeches, que comenzó a finales de 2023, inició su construcción este verano y se espera que esté terminado en el tercer trimestre de 2025.

El compromiso de este proyecto de última generación con la sostenibilidad y la responsabilidad medioambiental queda patente tras haberse iniciado los trabajos para la obtención de la certificación de sostenibilidad BREEAM.

El edificio se encuentra completamente pre-alquilado con un inquilino de primer nivel y un contrato de alquiler a largo plazo.

Miguel López Puche, Head of Dunas Capital Real Estate, destaca: “La industria del almacenamiento y la distribución en frío tiene fundamentales robustos y vive un momento de gran atractivo para los inversores. Este acuerdo de financiación es un impulso fundamental para seguir avanzando en el crecimiento de nuestro negocio inmobiliario”.

Daniel Schuldes y Javier Quintela de Cheyne Capital señalan: “Ésta es nuestra segunda operación de financiación con Dunas Capital Real Estate, tras una experiencia muy positiva en el PTL-Noblejas. Dunas nos sigue demostrando ser un socio de gran fortaleza, confirmando día a día su fiabilidad y ambición. En este sentido, cabe destacar el logro alcanzado en este proyecto, habiendo conseguido pre-alquilar la totalidad de la superficie de la nave logística, con un contrato de larga duración, a uno de los principales operadores logísticos del sector, alcanzado así mismo los más altos estándares de calidad en términos de construcción sostenible mediante la certificación BREEAM Excellent.”

Dunas Capital secured €45m with Cheyne for logistics scheme (ES)

Dunas Capital Real Estate has successfully closed a financing agreement of over €45m with Cheyne Capital Management (U.K.) LLP (Cheyne Capital), for the development of the Chiloeches project.

The loan will finance the construction of an approximately 49,000m² logistics building on a 94,000m² plot of land, with storage capacity for pharmaceutical products. The state-of-the-art building will have the latest temperature control system, with three storage chambers between +15ºC and +25ºC, three storage chambers between +2ºC and +8ºC, one negative cold chamber and one bi-temperature chamber. In total, the site has 69% of cold storage space, approximately 1,350m² of office space and 124 parking spaces, including electric chargers.

The development in the Corredor de Henares is at the heart of Spain’s most important logistics centre and has direct access to the A-2 highway. The location is only 45km from Madrid and has immediate access to the Madrid metropolitan area, making it well-positioned for national distribution.

Construction of the Chiloeches project, which began this summer, is expected to be completed in the third quarter of 2025.

The project has commenced work to obtain a BREEAM Excellent sustainability certification, demonstrating the development’s commitment to sustainability and environmental responsibility.

The building is fully pre-let with a top-tier tenant on a long-term lease.

Miguel Lopez Puche, Head of Dunas Capital Real Estate, said: “The cold storage and distribution industry has robust fundamentals and is currently very attractive to investors. This financing agreement is a key driver for the continued growth of our real estate business.”

Daniel Schuldes in London and Javier Quintela in Madrid of Cheyne Capital said: “We are pleased to expand our partnership with Dunas Capital Real Estate to support the development of the Chiloeches project. This is our second financing transaction with Dunas Capital Real Estate, who has proven to be reliable and ambitious partners, following a very positive experience with PTL-Noblejas. Significant achievements have already been made with this project, including securing a pre-let of the full area of the logistics warehouse on a long-term contract to one of the leading logistics operators in the sector, as well as achieving the highest quality standards in terms of sustainable construction.”

The Wagamama restaurant chain is expected to open new outlets in Ireland, following the closure of three franchises in Dublin yesterday that were operated by the Press Up group.

Branches on South King Street in the city centre, as well as in shopping centres in Blanchardstown and Dundrum closed after unsuccessful talks between Wagamama’s headquarters and receivers appointed to part of the Press Up group.

Sources with knowledge of Wagamama’s plans say the British chain is preparing to open new Irish outlets that it will run directly, and this will include a bigger restaurant in Dundrum.