Savills Investment Management acquires remaining interest in Real Estate Debt Manager, DRC Capital LLP
Savills Investment Management (Savills IM), has agreed to exercise the call option granted to it in July 2018 to acquire the remaining 75 per cent of member interests not already owned by it in DRC Capital LLP (DRC), the European Real Estate Debt Manager. The acquisition is expected to complete by the end of this month.
DRC was founded in 2012 by Dale Lattanzio, Rob Clayton and Cyrus Korat, and is a leading European real estate debt investment manager. It has arranged over GBP4.8 billion of debt investments since inception and currently has assets under management of GBP2.9 billion across a range of senior debt, high yield and whole loan products.
Savills IM acquired an initial 25 per cent member interest in DRC in September 2018, at which time it was also granted an option to acquire the outstanding 75 per cent of member interests in 2021. Cash consideration of GBP31.3 million ("Further Consideration") will be paid upon the completion of the acquisition of the remaining 75 per cent of member interests. Up to GBP33.7 million of additional cash consideration ("Final Consideration") may become payable in 2024 depending on the financial performance of the business over the three year period to 31 December 2023. The Further Consideration will be funded from existing resources of Savills plc.
Dale Lattanzio, who has been a member of the Savills IM's senior management committee since 2018, will continue to lead DRC, with ongoing support from Rob Clayton and Cyrus Korat and the other members of the DRC senior management team. DRC Capital LLP will operate under the "DRC Savills Investment Management" brand and, reflecting the specific requirements of debt investment, will retain investment autonomy with the continued support of Savills IM's CIO and Head of Investment Risk. Other functions of DRC will be aligned with the Savills IM platform over the coming period.
The acquisition of the remaining 75 per cent of member interests constitutes a class 2 transaction pursuant to the UK Listing Rules. In 2020, DRC reported profit before tax of GBP12.9 million before member drawings; this equates to GBP5.9 million on a pro forma basis, had the business been owned by Savills throughout the year. Gross assets of DRC at the end of December 2020 were GBP16.9million.
Alex Jeffrey, CEO of Savills Investment management, says: "DRC continues to innovate in the real estate debt market and has rapidly built an enviable position in an increasingly competitive environment. We are very happy with the progress of the partnership since 2018 – the combination of Savills IM's and DRC's investment teams provides a compelling offering to our clients by providing investment opportunities across the entire real estate capital structure."
Dale Lattanzio, CEO and Managing Partner, DRC Capital, comments: “We are delighted to further enhance the relationship between DRC and Savills IM. Offering a single point of access to the capital structure will continue to benefit our investors, who will be able to take advantage of the favourable market conditions for alternative lenders. We look forward to continuing our work with Savills IM in offering a comprehensive debt finance platform."
Mark Ridley, Group CEO of Savills, says: "I am delighted to welcome the DRC team into the Savills Group. Their real estate debt expertise will complement our existing equity capability and enhance the Group's services to our global investment client base."