Copenhagen and London-based real estate debt fund manager Kinnerton Credit Management has raised just under €130 million at the first close of its Kinnerton Residential Development II (RD II) fund, which has a final target of €200 million – which the firm aims to reach in the first quarter of next year.
The fund, which has a target return in the 12-14 percent range, began raising capital in April and is the successor to the firm’s first dedicated residential development fund, Fund C, which closed on €102 million in 2015.
Fund C has invested in 44 residential development credit facilities, of which 27 have been successfully repaid to date. The investment period for the fund runs out at the end of this year.
RD II will invest in between 50 and 80 loan facilities for the development of middle-income homes in and around growth cities in Denmark and, for first time, also in Southern Sweden. The facilities typically have a maturity of 16-18 months and the fund has a four-year investment period.
Kinnerton was launched in 2010 and its senior team includes former ATP Private Equity Partners professionals Jens-Bisgaard Frantzen, chief executive officer, and Matthew Baker, chief operating officer.
Explaining the attraction of alternative lenders such as Kinnerton, Bisgaard-Frantzen says: “There is competition from the banks but we don’t require as much equity to be put into each deal, which allows developers to do more projects. As we’re dedicated to the market, we can also operate more quickly than the banks.”
Furthermore, some Danish pension funds which invested directly in the market have since withdrawn following regulatory scrutiny of their activities. Kinnerton has both Danish and Swedish pensions in its investor base along with Danish endowments and foundations, family offices and high-net-worth individuals.
Kinnerton is seeking to broaden its activities in the Nordic region and is taking the first step by including Southern Sweden in the investment mandate for RD II. According to Baker, Swedish developers face the same issues as those in Denmark. For Kinnerton, the geographical expansion is not a huge undertaking, since the Oresund Bridge means Southern Sweden is as quick to reach from Copenhagen as parts of Denmark.
The firm has also begun raising a residential real estate equity fund, which currently has around €40 million of residential real estate units under management, which it is aiming to increase to between €60 million and €135 million.
Kinnerton was launched in 2010 to provide financing in segments of the Danish real estate market facing constraints following the global financial crisis. Its 2011-vintage Fund A raised €135 million for junior residential mortgages.
In 2013, Fund B raised €155 million and acquired the Danish ‘bad bank’s’ mortgage portfolio. It subsequently expanded its mandate to include junior commercial mortgages and residential development loan facilities.