Coral Capital to launch first institutional credit vehicle

The Naarden-based real estate debt fund manager is aiming to raise up to €400m for a debut pan-European debt fund dedicated to issuing construction loans on assets that have a social impact.

Netherlands-based real estate debt manager Coral Capital is aiming to launch its first institutionally backed fund.

The manager, which launched its first real estate debt fund in 2019, has raised three Benelux-focused vehicles to date backed by family offices and high-net-worth individuals. The firm is now looking to raise a subsequent fund from institutional investors.

“We are aiming to launch this fund by the second quarter of next year. We are targeting around €300 million and €400 million in equity,” Victor van Loendersloot, founder at Coral, told Real Estate Capital Europe. “We have spoken to some European institutional investors already that are interested in the product,” he said.

To assist in attracting institutional capital, the firm hired Martijn van den Eijnden, former finance and investment manager and London-based private equity firm Schroders.

“And then we want to leverage the fund,” van Loendersloot explained. He said the firm would also seek to raise debt to add leverage to the equity it raises in line with the increased cost of developing assets in this current high interest rate environment.

The proposed fund would be the firm’s largest vehicle to date. Its first, Capital Fund 1, attracted €50 million and Fund 2 attracted €60 million. Its latest product, Fund 3, which launched in 2021, also attracted €60 million from investors.

The vehicle, which will have strong environmental, social and governance requirements, is expected to be used to provide whole loan development finance to property builders in what the firm calls “bridge-to-development”. The financing provided is expected to range between €10 million to €30 million in size. The firm will originate loans of up to 85 percent loan-to-cost via the fund.

van Loendersloot said the vehicle has a pan-European focus, with an emphasis on Eastern Europe and Poland in particular.

He explained the firm opted for a pan-European strategy because there will be very few sponsors in each given country that will comply with its strict ESG investment criteria.

Loendersloot said the firm has seen alternative lenders focus on the environmental aspects of ESG criteria, but very few tackle the social impact aspect – an area Coral aims to specialise. Specifically, the firm will monitor how a borrowing developer is treating its blue-collar workers and how an asset provides other social benefits to a community, like social programmes.