Castlelake begins fundraising for €500m European property credit vehicle

The US firm has been growing its European lending exposure in partnership with lender Earlsfort Capital Partners.

Minneapolis-headquartered alternative investment firm Castlelake has started fundraising for a dedicated European real estate credit vehicle.

A source close to the firm said the manager is aiming to raise a senior-focused European real estate debt fund. The firm is hoping to raise €500 million from institutional investors.

Castlelake has been growing its European lending exposure through its partnership with Dublin and London-based non-bank lender Earlsfort Capital Partners. Last December, the two firms announced they had built a UK and Ireland loan book of more than €300 million.

Transactions included an €80 million facility to refinance a 300,000-square-foot Dublin commercial and residential portfolio for Irish property developer Cosgrave Property Group and a €23.1 million facility to refinance 70,000 square feet of new build grade A office space at Bonham Quay, Galway, for Irish property development firm Edward Capital.

It is understood the proposed vehicle will have a larger scope than the UK and Ireland, and will include continental Europe within its remit. It will be the first dedicated European property credit vehicle for Castlelake.

The company has been actively fundraising for its diversified flagship credit fund series in the past three years. It held a final close on its Castlelake Income Opportunities I in 2020, raising $456 million. It held a final close on its successor fund in November 2022, raising approximately $782 million.

Fund II is a private credit product focused on asset-based investments, including stabilised commercial real estate in Europe and transitional bridge lending in North America, speciality finance solutions for small and medium-sized businesses and consumer finance providers, and secured aviation-related lending.

Market participants have told Real Estate Capital Europe this year that senior-focused property lending vehicles have received a healthy uptick in risk-adjusted returns, as the cost of debt has increased.