Frankfurt-based property asset management firm Silverton Group is working on plans to enter the real estate debt space with its first commingled property credit fund, after revisiting longstanding ambitions to launch a credit vehicle.
Speaking to Real Estate Capital Europe, Jascha Hofferbert, partner at Silverton, said the firm intended to launch its first commingled real estate debt fund in 2020, but the covid-19 pandemic disrupted its plans.
Now, Silverton is working towards launching a €200 million whole loan and mezzanine debt fund in 2024, he added.
Through the fund, Silverton will aim to target the mid-sized market in Germany and provide loans of between €5 million to €30 million in a variety of sectors across the country. The Frankfurt company does not plan to provide development finance and instead will seek opportunities brought about by the refinancing gap.
“I would say [Silverton’s focus will be] more likely on the refinancing side of it, because, for project development these days in Germany, construction costs are high. A lot of developers are struggling to survive because they need to sort out their unfinished developments.
“It is more likely we will find opportunities in the refinancing situations of existing property owners.”
Market participants have recognised the need for capital for refinancing maturing loans in the coming months and years. In January, manager AEW Europe reported a refinancing shortfall of an estimated €51 billion in Germany, France and the UK.
Unforeseen circumstances
Silverton, which launched in 2006 as a distressed debt consultant, started investing in real estate debt in 2020 through a mandate awarded to it by a US -based investment manager. Through the mandate, Silverton has focused on non-performing loans and distressed debt situations within real estate.
Hofferbert explained the firm is at present not investing through the mandate because the US firm wanted to halt activities due to the current market climate.
He added debt fundraising conditions are challenging in the current market, due to hesitancy among institutional investors. After speaking to German pension funds and insurance companies, which had invested in debt funds previously, Hofferbert believes investors are in a wait-and-see stance, due to them having observed defaults in the market. This is an “awkward” situation because of the demand for alternative finance in Germany, he said.
“[Investors] are also reconsidering how their investments are turning out. Some of them will get into trouble, that’s what we already see. So, this is a reason why, for a German investment manager to raise funds in the German environment, at this point in time, it’s not easy.”
However, Hofferbert said broadening Silverton’s target investor base outside of Germany is a potential solution.
Other German managers have struggled to raise capital for a debt fund, despite the increasing tailwinds for the sector.
In April, Real Estate Capital Europe reported Frankfurt-based manager KanAm Grund Group was revisiting plans to launch its maiden real estate debt fund due to similar interactions with German investors. The firm is now looking to reassess its debt entry next year, after having previously shelved its plans.
Similar issues were also noted with French investors earlier this month, with Luxembourg-headquartered asset management firm Sienna Investment Managers readjusting its fundraising targets due to a reluctance to allocate from investors, despite the defensive nature of a debt fund presently.
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