GAM targets first close for second European debt fund

The real estate lending business of Swiss asset manager GAM is raising its second European debt fund, with a first close targeted by the end of Q2 2017, Real Estate Capital has learned.

The business, formerly part of hedge fund Renshaw Bay before GAM acquired it in 2015, is aiming to raise between £300 million and £400 million by the final close, which would be roughly in line with its maiden fund, which closed on £356 million in March 2015.

GAM will provide middle market whole loans and mezzanine debt, with a target net return of around 10 percent across the fund. Around half of the fund is likely to be invested in the UK, with other European markets including the Benelux, Spain and Ireland also targeted. The firm’s first fund had an average loan-to-value ratio of around 71 percent.

“Our first fund investors were predominantly UK-based pension funds and we expect a similar weighting with respect to Fund II. However, we are seeing strong demand from European, Asian and US investors as well as they view European private credit presenting better opportunities than the US market,” GAM investment director Jon Rickert told Real Estate Capital.

The fund is sterling denominated, with a euro-denominated fund under consideration.

GAM is understood to be in discussions to provide loans in the UK, Ireland and Spain which will form the initial investments for the new fund. “We have always targeted less competitive situations in markets where banks have limited risk appetite due to legacy issues or regulatory and/or capital pressures,” said Rickert. “Regulatory capital requirements continue to weigh on banks and their appetite for real estate lending remains subdued. While that is true across Europe, it appears that bank lending behaviour has been most noticeably impacted in the UK, Ireland and Spain.”

GAM has fully deployed its first debt fund across 25 investments. The fund is generating a dividend yield of 6 to 8 percent, and is on track to deliver a total return around 10 percent, in line with the fund’s targets, Rickert said.

Renshaw Bay was established in 2011 by Bill Winters with capital from RIT Capital Partners, with the objective of benefiting from investment opportunities resulting from the changing banking and credit landscape. Winters left for the CEO job at Standard Chartered in 2015.