Aukera targets larger loans with the launch of its second debt fund

The German property finance boutique says potential club deals between its two credit funds will enable it to provide higher debt volumes per transaction.

Just one year after its creation, the independent, owner-managed property finance firm Aukera Real Estate, is raising capital for its second real estate debt fund. The German company, founded in Essen in July 2020, announced earlier this week it had secured a €66 million capital commitment from a German insurer for Aukera Real Estate Debt Fonds II.

According to Antje Bonnewitz, investment manager at Aukera, the launch of a second vehicle for its lending strategy has expanded the firm’s dry powder while increasing its capacity to take on larger debt deals “thanks to the joint debt investments that can be made combining the capital of the two sub-funds”, she told Real Estate Capital.

Bonnewitz: ‘We aim to combine capital from our two funds in individual lending deals’

Bonnewitz said Aukera will aim to combine capital from its two funds in individual lending deals, “so we will have the possibility of providing higher volumes of debt per deal than before”.

With Fund I, the company had focused on providing loans in the €25 million to €50 million range. However, the launch of a second fund in the series will enable it to originate loans of up to €150 million, Bonnewitz said. “Now, we have two large investors on board and we will continue fundraising for the second Luxembourg debt fund. Due to the structure of our two sub-funds, we can achieve club deals for investors that allow us to provide high loan volumes on our own.”

Aukera is targeting a total fundraise of €350 million for its second strategy, a target that Bonnewitz believes is achievable over the next 12-15 months. “We don’t have a fixed fundraising period, but we assume that, due to the current favourable macroeconomic conditions for real estate debt, we will manage to secure further commitments relatively shortly,” she said. “Therefore, we expect to hold a second closing for the fund by the end of Q3 or by the beginning of Q4 this year.”

Aukera launched its first debt fund in August 2020 on behalf of a single institutional investor, also a German insurance firm. The firm raised €695 million for the vehicle, through which it has so far made eight investments, having deployed €531 million of the total capital raised.

Like its predecessor fund, the new vehicle targets senior debt investments, and is aimed exclusively at institutional investors. It is a sector agnostic strategy focused on German-speaking markets and the Benelux, where the firm expects to find most debt investment opportunities as well as where the majority of its investor base is located.

Bonnewitz said: “The most important investors for us are German speaking investors, like insurance companies and pension funds, because they are actively looking for investment opportunities in real estate debt rather than in equity investments, driven by the steady income the asset class can provide in the current market environment.

“If we get the returns we need in Germany, Austria or the Netherlands, we do not see the need to look for opportunities elsewhere.”

The firm’s focus on senior lending through its two debt strategies is, according to Bonnewitz, a direct response to its investors’ appetite. “We will be mostly originating development loans, loans to refinance existing debt facilities, or acquisition finance,” she said. “Our investors do not target double digit returns, they prefer being senior lenders instead of mezzanine or junior lenders, also to deploy higher amounts in absolute terms.”

Bonnewitz said the pipeline of opportunities offered by senior lending in Germany is widening for debt funds like Aukera, due to local banks’ ongoing retrenchment from the market. “The banks in Germany are less active than before. We have a deals pipeline of above €8 billion which shows there is a huge demand for alternative lenders. We are not only here to stay but to increase our market share because banks will not be as aggressive lenders as they were before the crisis so there are now more opportunities for us.”