Nashville-headquartered investment manager AllianceBernstein is aiming to grow its influence in Europe’s real estate lending market with a significant fundraising drive.
The manager is understood to be targeting €1 billion of capital commitments for its second dedicated European property lending fund – AB European Commercial Real Estate Debt Secured Income Fund II – which launched in January. A first close for the fund is expected to be held within the next two months, with final close to follow up to 12 months later.
A source close to the firm said AllianceBernstein will aim to generate net returns of 7-8 percent through the lending strategy. It will focus on mid-market lending opportunities and will aim to provide loans typically ranging from €50 million to €100 million.
AllianceBernstein entered the European property debt market in November 2020, when it bought a strategic stake in Lacarne Capital, a property lending business launched in January that year by Clark Coffee, previously the head of real estate for London-based lending platform Tyndaris, and a former Deutsche Bank real estate banker. Coffee is now chief investment officer and head of European commercial real estate debt.
The manager came to the European market with €1.2 billion of capital, which included capital from its parent company, US insurer Equitable and its first European real estate debt fund – through which it began deploying €750 million of capital in March 2021.
The first fund has been deployed within two years, in 13 transactions including deals in execution. Across its secured income business, AllianceBernstein is understood to have deployed more than €1 billion of capital across 17 deals.
Since coming to the market with €1.2 billion, it is understood AllianceBernstein has secured additional mandates to increase its capital commitments. However, AB European Commercial Real Estate Debt Secured Income Fund II will represent its broadest fundraising drive since entering the market.
Lending activity by the firm in Europe has included funding a retirement living scheme in London. Last week, AllianceBenstein’s European Commercial Real Estate Debt team provided Goldman Sachs-backed developer Riverstone with a £137 million (€156 million) whole loan to support the Riverstone Fulham Residence in the UK capital. The whole loan is secured against 161 newly built residential apartments located on the Thames riverside in Fulham – the assets also include 20,000 square feet of amenities.
As a result of last year’s spike in interest rates, the average amount of leverage provided by the firm in loan deals has been reduced. It is understood average LTV reduced from 68 percent in its 2021 transactions to 58 percent in 2022. Returns are understood to have increased by around 15 percent between 2021 and 2022.
While its second European fund is intended to be AllianceBernstein’s widest ranging fundraising since entering the market, the firm has a strong debt fundraising track record in the US market. In November 2022, affiliate title Real Estate Capital USA reported the firm had closed its fourth US commercial real estate debt fund on $1.3 billion of committed capital.
The firm’s European expansion was designed to build on its long-standing US commercial real estate debt business, which it launched in 2013. Its US team has completed 146 transactions building assets under management of more than $9.5 billion.
Last year, AllianceBernstein acquired CarVal Investors, a credit specialist based in Minneapolis, Minnesota, with $14.3 billion in assets under management, for an upfront price of $750 million, further boosting its credit exposure.
CarVal was later rebranded to AB CarVal Investors as a new independent subsidiary of AllianceBernstein. The transaction was funded through Equitable’s ongoing $10 billion capital commitment to grow the Nashville manager’s private alternatives platform, which it announced in 2020.
During a period from December 2020 to April 2022, the firm raised $4.5 billion of capital commitments through its US commercial real estate debt platform.