Värde Partners and Agam Capital Form Life and Retirement Solutions Joint Venture

MINNEAPOLIS and NEW YORK – Värde Partners and Agam Capital announced today an agreement to pursue the acquisition, reinsurance and management of life and retirement businesses globally.

The agreement calls for Värde Partners and Agam Capital to form a joint venture that will combine the investment management expertise of Värde Partners with the proprietary insurance solutions platform developed by Agam. The JV will have the capability to price and manage complex insurance products with embedded market and actuarial risks, on a global basis. It will serve as a turnkey solution for financial modelling and enterprise risk management to provide comprehensive economic solutions to life insurance companies.

In connection with the launch of the JV, Värde Partners is seeking initially to invest $500 million in complex life insurance, annuity, and reinsurance assets that will be supported by the JV. This is part of Värde’s intention to broaden its investing in targeted sub-sectors of the financial services industry, marking the expansion of its private equity strategy into insurance.

Elena Lieskovska, Partner and Head of European Financial Services at Värde Partners, said:

“Given the current landscape of historically low interest rates and fundamental regulatory and accounting changes, we believe the opportunity across the $23 trillion life insurance industry is huge. Life insurance companies are increasingly seeking risk mitigation solutions for legacy blocks of liabilities with multi-dimensional risks. This is particularly true for complex annuity products, such as those with high guarantees or exposure to certain market risks, which typically attract a higher capital charge. We are excited to expand Värde’s financial services footprint into insurance, and partner with Agam to provide alternative solutions to the industry.”

Agam’s Co-Founders, Avi Katz and Chak Raghunathan said:

“The need for multi-dimensional solutions to the complex changes facing the life insurance industry has never been greater. Against this backdrop, we believe the combination of Värde Partner’s core strengths in complex transactions together with Agam’s differentiated pALM platform will create a world-class insurance solutions provider. In particular, the Agam platform is designed to price, analyze and manage complex insurance products with embedded capital market risks and offers creative structures and solutions on a global basis.”

Agam’s highly scalable, proprietary technology platform applies machine learning, predictive data analytics and cloud computing to evaluate and assess complex insurance liabilities. Its innovative approach incorporates advanced analytical techniques, including integrating transaction modelling with actuarial cash flows.

About Värde Partners

Värde Partners is a $14 billion global alternative investment firm that employs a value-based approach to investing across a broad array of geographies, segments and asset types, including corporate and traded credit, real estate, mortgages, financial services, real assets and infrastructure. The firm sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors and private clients. Now in its third decade, Värde employs more than 300 people globally with regional headquarters in Minneapolis, London and Singapore.

About Agam Capital

Agam is a New Jersey-based insurance solutions provider, founded by Abraham Katz and Chak Raghunathan, senior executives from Apollo Global Management and Aflac Inc. While traditional insurance solutions have been aimed at enhancing asset yield to support a liability structure, Agam has focused its efforts on building technology for risk management with integrated analytics. Agam’s expertise is to develop solutions for complex cash flow streams through greater hedging optimization and meaningfully lower operating costs.

Pretium Completes Acquisition of Deephaven Mortgage from Värde Partners

NEW YORK – Pretium and Värde Partners today confirmed the completion of their previously announced agreement for Pretium to acquire Deephaven Mortgage LLC (“Deephaven”) from Värde Partners.

Founded in 2012, Deephaven is a leader in the Non-Qualified Mortgage industry. The Company partnered with Värde in 2014 to help fund its growth and expansion, and has since invested in over $5 billion of Non-QM loans to become one of the leading issuers of Non-QM loan securitizations.

Wells Fargo Securities served as financial advisor to Deephaven and Värde. Mayer Brown LLP served as legal counsel to Deephaven and Värde. Nomura Securities International, Inc. served as financial advisor to Pretium. Sidley Austin LLP served as legal counsel to Pretium.

Terms of the transaction were not disclosed.

About Pretium
Pretium is a specialized alternative investment management firm focused on residential real estate, mortgage finance and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy, the residential housing sector, and mortgage finance markets. Pretium has built an integrated analytical and operational ecosystem within the U.S. residential housing, mortgage, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. For more information, please visit www.pretium.com.

About Värde Partners
Värde Partners is a $14 billion global alternative investment firm that employs a value-based approach to investing across a broad array of geographies, segments and asset types, including corporate and traded credit, real estate, mortgages, financial services, real assets and infrastructure. The firm sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors and private clients. Now in its third decade, Värde employs more than 300 people globally with regional headquarters in Minneapolis, London and Singapore. For more information, please visit: www.varde.com.

About Deephaven
Deephaven is a full service, multi-channel, long-term credit provider in the Non-QM space, providing access to financing to millions of underserved clients throughout the U.S. Deephaven was founded in 2012 to help rebuild the non-government mortgage market. For more information, please visit www.deephavenmortgage.com.

Lessons from Traffic Jams

Sitting through India’s infamous traffic jams in its bustling cities has provided ample time to think about how to best navigate this market in all ways physical and financial.

India is unique in so many ways, not least economically and financially. It is simultaneously a significant player on the world stage and a somewhat self-contained economic island.

The opportunities are virtually limitless for institutional investors that are well set up, but the challenges we face tend, like the country itself, to be one of a kind. To operate successfully in this intriguing and diverse market calls for a deep-rooted knowledge that takes time to acquire. There are no short cuts.

For us, there are three drivers of the Indian opportunity set, each relating to areas in which the economy has encountered turbulence in recent years: high levels of non-performing loans (NPLs) that burden the banking system; lack of liquidity following serious difficulties for non-banking financial companies (NBFCs); and stress in the real estate market.

Let’s take those in turn. First, NPLs are a legacy of the period following the 2008 global financial crisis, when India was experiencing very rapid growth. In that timeframe, the amount of debt in the system grew as a result of fast economic growth and a need for capital expenditure (capex) to build industry and infrastructure.

Problems started when a number of projects encountered delays, such as waiting for approvals and a shortage of raw materials. Delays in these capex-heavy projects ultimately resulted in a longer timeframe to generate income, and loans became non-performing. It has led to a classic example of ‘good asset, wrong balance sheet’.

Second, NBFCs are institutions, sometimes referred to as shadow banks, that extend loans, but many do not take in deposits and instead rely on capital market financing. NBFCs have been an important source of lending in the Indian financial system for the last five years but more recently, in a hunt for yield, they tried to fund themselves with cheaper capital in the form of short-term commercial paper.

But commercial paper matures on average in three to six months, while NBFC lending runs anywhere from 24 months to seven years. And when one of the major NBFCs ran into trouble last autumn, this mismatch was exposed and the commercial paper market dried up.

Finally, the real estate sector, after years of high growth, is starting to show signs of stress in a country where local market dynamics are far more nuanced than in other developing nations. A great deal of development happened very quickly, particularly in high-end residential real estate, leaving a general over-supply of projects and a number of developers over-leveraged. The sheer rate of construction in cities like Mumbai and Delhi has radically changed their neighbourhoods, mandating a physical presence to truly understand the rapidly evolving and increasingly complex real estate market.

Set against the backdrop of bank lending hobbled by NPLs and NBFCs also reducing their role as lenders, you can see why borrowers – including those in real estate – need to find alternative sources of credit.

However, these and other difficulties elsewhere in the system should not be the only measure of the opportunities in India. That would be a very short-sighted approach, particularly given that the government is proactively trying to solve the problems the credit system is facing.

Take NPLs, for example. Under different circumstances, they could have posed a systemic risk to the banking system. While substantial difficulties remain, various policy tools, including the new nationwide bankruptcy code, are a step in the right direction to address this problem, and balance sheets are gradually being cleaned up.

In short, we anticipate continuing opportunities to present themselves and, as these become better known, for more investors to focus on India. However, we believe it is important to remember that being successful in the Indian market involves grappling with complexities on the ground, staying extremely disciplined in one’s approach, and spending a lot of time getting to know the counter-parties and players involved.

We have hired with that in mind, assembling Singapore and Mumbai-based teams with experience structuring deals in the region, local knowledge and language skills required to avoid certain pitfalls, and a global perspective to compare risk across geographies.

A last observation would be that much of our approach can be traced back to having, in the early years, sat in a lot of traffic jams. Our presence on the ground has positioned us to better understand and capture some of the best opportunities in the market while maintaining our global standards of doing business. We also came to know the times in which traffic was flowing in the wrong direction and therefore when we ought to stay put.

Not a bad model for doing business in this remarkable country.

Written by Haseeb Malik, Partner and Head of Asia Corporate and Traded Credit at Värde Partners. Originally published by Asia Asset Management.

Värde Partners Closes Commercial Real Estate Loan in Mobile, AL

MINNEAPOLIS – Värde Partners, an alternative investor in broad strategies including commercial and residential mortgage markets, today announced that it has closed on a newly originated $32 million loan for the acquisition of four limited service Hilton-branded hotels in greater Mobile, Alabama.

The loan provides short term capital to facilitate a time sensitive acquisition and help the borrower execute their value-add business plan. “This deal is a great opportunity to provide flexible capital to an experienced sponsor on high quality assets in an attractive tertiary market,” said Alek Roomet, Director of Originations for Värde Partners.

Värde’s entrance into the commercial real estate loan market follows the retraction of traditional banks from non-core markets and their divestiture of non-core businesses, leaving many credible borrowers without access to needed capital. “This loan reflects our lending strategy to provide commercial mortgages to borrowers who need flexible capital and timely execution,” said Brian Schmidt, a Partner of Värde. Värde’s mortgage business is a provider of capital to the commercial and residential mortgage markets, and focuses on providing flexible capital and certainty of execution.

About Värde Partners:
Värde Partners is a $12 billion global alternative investment firm that employs a credit-oriented, value-based approach to investing across a broad array of geographies, segments and asset types, including real estate, corporate credit, mortgages, specialty finance, transportation and infrastructure. The firm sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors and private clients. Now in its third decade, Värde employs 250 people with main offices in Minneapolis, London and Singapore and additional offices around the world including New York.

Värde Partners Sells Japanese Real Estate Assets

SINGAPORE – Värde Partners, the $12 billion global alternative investment firm, today announced that Japanese commercial real estate assets comprising one of its investment portfolios were sold for ¥49.7 billion to property developer and fund manager CapitaLand.

The portfolio comprises two office buildings in Yokohama – Yokohama Blue Avenue and Sun Hamada; one office building in Tokyo – Kokugikan Front; and one shopping mall in Saitama – Seiyu & Sundrug.

The Japanese real estate market continues to be a focus for Värde. Over the last 8 years, Värde has built an investment portfolio of approximately JPY 90 billion ($800 million) of Japanese real estate and real estate related assets. “The sale of these assets to a well-respected buyer is representative of our business model in Japan, teaming with experienced asset management to create value enhancement across the portfolio by improving lease terms, occupancy and spending the required capex. Värde continues to seek opportunities where it can unlock and create value. In addition, establishing an office in Tokyo in 2015 has helped build out our real estate business” said Ali Haroon, a Partner of Värde and Global Co-Head of Real Estate for the firm.

About CapitaLand Limited (www.capitaland.com):
CapitaLand is one of Asia’s largest real estate companies. Headquartered and listed in Singapore, it is an owner and manager of a global portfolio worth more than S$78 billion as at 31 December 2016, comprising integrated developments, shopping malls, serviced residences, offices, homes, real estate investment trusts (REITs) and funds.

About Värde Partners:
Värde Partners is a $12 billion global alternative investment adviser focused on investing capital and resources across multiple segments and markets that includes corporate assets and sovereign debt, residential mortgages, real estate, specialty finance and transportation. Värde sponsors and manages a family of private investment funds with a global investor base that includes foundations and endowments, pension plans, insurance companies, other institutional investors, and private clients.

Värde Partners Closes Commercial Real Estate Loan in Charlotte

MINNEAPOLIS – Värde Partners, an alternative investor in broad strategies including commercial and residential mortgage markets, today announced that it has closed on a newly originated $20.25 million loan secured by an apartment complex in Charlotte, North Carolina.

The loan provides capital to acquire and renovate apartment units as leases naturally turn over with the goal of increasing rents and improving cash flow at the property. “This deal is a great example of delivering additional proceeds relative to traditional lenders in a flexible, customized loan structure,” said Alek Roomet, Director of Originations for Värde Partners.