Adam Zausmer, chief credit officer at Ready Capital, answers SCI's questions

Q: Ready Capital and Starz Real Estate recently formed a joint venture to originate around €300m of new commercial real estate loans over the next two years (SCI 21 July). What prompted the move? What is currently exciting to you in European CRE?
A: It was a great opportunity to further expand and diversify Ready Capital’s international lending business. The Starz team is impressive, they are local experts and a highly experienced CRE lending platform.

From a geographic and relationship perspective, Starz has a strong presence in Europe, with deep relationships. For example, we can now originate transitional bridge and term loans throughout Europe - with a particular focus on the UK, the Netherlands, France, Switzerland and Portugal. This will strengthen our presence in Europe, which has been mostly focused on the UK and Ireland to date.

Q: Of course, Starz made the headlines last year with the first European CRE CLO (SCI 1 October 2021). Is this a market you feel can take off, or at least grow, in Europe?
A: From Starz’s perspective - as a non-bank lender - when you look at the European banks, many are generally at maximum capacity on CRE lending exposure, focusing extensively on larger, lower leverage loans and warehouse financing. They tend to be very slow to underwrite and approve loans; therefore, sponsors are considering alternative lenders. Also, Starz generally has few non-bank competitors that understand the tax and enforcement requirements to lend across multiple European jurisdictions.

We can certainly say that Ready Capital has a strong CRE CLO track record in the US, having issued nine deals since 2016, and we plan to leverage Starz’s local expertise to effectively replicate that strategy and optimise returns in Europe. As a firm, we are heavily active in the capital markets and it excites us that Starz has made an entry into the CLO market in Europe. We believe that, with their lending expertise and the amount of volume they plan to originate, there is certainly a robust market for that.

Q: In what can generally be described as a post-Covid-19 phase, but yet still in a complex macro-environment, are there any particular real estate sectors you are currently targeting?
A: We are considering opportunities from a geographic perspective to start with. We are focusing on deals in geographies where the legal framework is easier to navigate and where we can rely on the jurisdictional expertise of the Starz team. We are definitely interested in certain opportunities located in what we classify as the major gateway cities - like Dublin, for example, where there is a material housing shortage - or adaptive re-use of office to residential in major cities throughout the Netherlands.

We are focused, similar to how we lend in the US, on less volatile asset classes that have shorter duration leases that serve as a hedge against inflation - specifically the apartment sector, where there also tends to be a shortage of good-quality, affordable housing. With that said, there are other property types we focus on and are looking at opportunistically, such as industrial and self-storage.

Q: Finally, I wanted to get your views on ESG and real estate? Do you think the lending industry is gradually shifting towards rewarding a ‘green premium’ when financing ESG-led real estate projects?
A: Yes, and ESG is a significant focus of ours in the US. We are involved and looking to get more involved in environmentally-friendly developments.

I think ESG and how it relates to the CRE sector is certainly evolving and our firm is at the forefront in terms of figuring out the best ways possible to execute on our ESG policies. Ready Capital considers green attributes in our underwriting and a developing preference exists for green buildings, due to their energy efficient methods and lower operating costs. In terms of the social impact, we have a substantial presence in the affordable housing space and we have several lending products that support developments in regenerated areas that provide housing options to lower income residents.

Vincent Nadeau