Cairn Capital has launched its first European real estate debt fund with €50 million of seed capital from majority owner Mediobanca and an eventual target of €750 million.
The open-ended Cairn European Commercial Mortgage Fund will invest across the debt capital structure in listed or unlisted and rated or unrated commercial mortgage securities, of either investment or non-investment grade.
The fund can also make or participate in short-term bridge and warehousing financing, typically to facilitate longer-term debt structures in which it can be a cornerstone investor. Cairn aims to hit net returns of between 7-8 percent per annum.
The fund can also use conservative gearing on a deal by deal basis, up to a maximum of 1x net asset value.
“This product is very much looking to capitalise on what we have been doing over the last few years on both the advisory and the investment side”, said Peter Hansell, Cairn’s head of real estate debt.
“We’re increasingly seeing deals structured as clubs which offer significant benefits and opportunities”.
Italy’s Mediobanca acquired 51% of Cairn last August and Hansell said the fund’s launch demonstrated how the strategic partnership “is enabling us to capitalise on the CRE debt expertise we’ve developed, through Cairn Capital’s multi asset credit strategy and real estate debt advisory business, for the benefit of our investors.”
Examples of the club transactions Cairn’s advisory business has structured and placed with investors in the last 18 months include Tibet CMBS, a €203m Italian deal backed by a loan on a prime Milan retail asset and Pangaea, a €237m single-tranche, unrated bond placed with one US investor secured on National Bank of Greece branches.
CECMF’s first investment is a junior tranche of a CMBS deal issued last year of just under €10 million.
Cairn anticipates interest from institutional investors from North America and Europe over the coming months, and has a strong pipeline of potential investments.
“We are hoping the fund will grow quickly from the €50 million seed capital which is there to start investment”, Hansell said. “We’re targeting a very much bigger fund, ultimately €750 million which will enable the fund make individual investments of significant size.”.