Frankfurt-based fund manager KanAm Grund Group is considering reviving its plans to enter the European real estate debt market, after shelving its first real estate debt fund last autumn due to market volatility caused by the Ukraine war and increasing interest rates.
Speaking to Real Estate Capital Europe, Olivier Catusse, managing partner at KanAm Grund, said the firm launched the Luxembourg-domiciled KanAm Grund Real Estate Debt Fund in 2021, but the war in Ukraine and the subsequent rise in interest rates led to the firm not going forward with marketing the fund.
“These events would have created an additional risk for the calculated fund performance caused by the volatility and then historical sharp rise of interest rates. The fund would have started with investments in a falling market,” he explained.
Amir Darabi, who was responsible for institutional sales for the fund, left the company in September 2022 to join manager BNP Paribas Real Estate Investment Management Germany as head of institutional sales and investor relations. He joined KanAm in 2020 from German Bank BayernLB, where he spent over nine years, and was most recently head of institutional clients.
KanAm Grund, which is part of the wider KanAm real estate group, is monitoring how the market responds to volatile conditions. Catusse said there are no immediate plans to revive the strategy but said a decision about its viability will be made next year.
“We are currently not contemplating to enter the market with a debt fund but are monitoring closely the market to reassess the situation in 2024,” he added.
The firm, which manages €7 billion worth of assets in Europe and North America, was aiming to raise €100 million for its maiden real estate debt fund to target lending opportunities in Germany.
A source close to the firm told Real Estate Capital Europe KanAm spoke to investors to gauge interest in the fund following its initial launch but halted these activities because of the reluctance from investors to allocate due to geopolitical issues caused by Russia’s invasion of Ukraine in February last year. The subsequent interest rate hikes in autumn fixed the firm’s plans to discontinue the pre-marketing activities and reassess its plans in 2024.
The fund received no investor commitments, the source added.
KanAm currently operates its flagship open-end real estate equity platform, Leading Cities Invest, which manages nine specialised institutional real estate funds and 12 asset management mandates. The investment focus is on Germany, Europe and North America.
Several companies have entered the European property lending market this year, such as Geneva-based private banking and asset management firm Union Bancaire Privée which as of February is raising for its first European real estate debt fund. In March, Real Estate Capital Europe reported on the proposed entry of Toronto-based real asset manager Slate Asset Management, and the potential expansion of CIM Group’s $10 billion US commercial real estate credit platform into Europe.
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, including in KanAm’s core market of Germany – as well as France and the UK.
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