Edmond de Rothschild preps debt fund launch despite covid-19

The firm plans to introduce its first real estate debt offering after rebranding its property business this month.

Coronavirus may have created multiple fundraising hurdles – including a ban on in-person meetings – but Edmond de Rothschild Real Estate Investment Management is still proceeding with the structuring and pre-marketing of a €300 million pan-European real estate debt fund according to its “original timeline,” according to chief executive officer Pierre Jacquot.

The launch of the new vehicle was in the works as early as October last year when the firm brought on board Ralf Kind, ex-CEO of listed German commercial property company DEMIRE Deutsche Mittelstand Real Estate. Including Kind, the firm has hired two dedicated professionals for the new debt strategy, in addition to half a dozen of existing real estate team members who will also work on the new business. With a high-yield strategy, the vehicle will look at private credit opportunities across the capital stack, including senior loans, junior loans, mezzanine and preferred equity in Europe.

EDR is not planning an official launch of the fund until the summer, however. “There is a lot of preparation, structuring and research work to be done,” Jacquot said on why the timeline hasn’t changed. “They want to take advantage of this period to also talk to market operators to help evaluate the situation.”

Having said that, Jacquot admitted that covid-19 has made it “uncertain” and “difficult” to execute both transactions and fundraising. While the former has been affected by slower decision-making processes and greater difficulty in arranging financing, the latter has been challenged by travel restrictions and social distancing measures that have done away with in-person meetings with investors.

Despite – or rather because of – the uncertainty, however, EDR is proceeding with its planned fundraise. Jacquot said: “We think the crisis will generate opportunities of real estate debt deals. It is often the case after volatile times.”

The fund will be the first real estate debt fund for the firm, which already manages a €2.6 billion infrastructure debt platform. The new product offering follows EDR’s consolidation of its three real estate businesses earlier this month under a new global brand – Edmond de Rothschild Real Estate Investment Management. On the real estate equity side, EDR currently manages around €2 billion in open-ended vehicles and €8 billion in closed-ended vehicles.

The new brand combines pan-European fund manager Cording Real Estate Group, French firm Cleaveland and Swiss-based Orox into a €10.4 billion pan-European platform. Edmond de Rothschild entered the real estate sector in 2012 when it acquired Orox. Post-consolidation, the firm hopes to double the size of its real estate portfolio in the next three to five years.

The firm’s real estate business currently has 50 percent of its capital coming from local institutions in markets where the firm has a real estate presence, 30 percent from global institutional investors and 20 percent from private capital. And for the firm’s AUM, around 50 percent of it is in France, 20 percent in Switzerland, 10 percent in Benelux and the rest is equally shared between the UK and Germany.

Timeline

Evolution of Edmond de Rothschild Real Estate Investment Management

2012 Acquires Swiss real estate fund manager Orox

2016 Acquires French firm Cleaveland

2018 Acquires pan-European fund manager Cording in 2018

        – starts to integrate the three real estate businesses

2019 Hires Ralf Kind to start its real estate debt business

2020  Officially combines the three firms into a new global brand Edmond de Rothschild Real Estate Investment Management

        – plans to launch its first real estate debt fund in the summer