French fund manager Amundi is aiming to build on its track record in real estate investment by entering the property lending market.
The firm is planning to raise capital for its first European real estate debt fund, expected to be launched in H1 2018. The asset manager is planning to raise around €500 million to deploy through senior lending in club deals or participations in the syndication market. The firm’s sweet spot for lending will be between €30 million and €50 million per asset, with a leverage between 50 percent and 70 percent.
“Investing in property debt makes sense at this point of the cycle. Returns are still attractive in terms of relative value and, through debt, you are much more protected,” Pedro Antonio Arias, Amundi’s director of real and alternative assets, told Real Estate Capital.
“The recovery rate is much higher in private debt than in the public market. If you have the security package, you can take the asset in case of default, whereas, if you are a bond owner, you are left with your paper,” he added.
Investors are increasingly seeing debt as a valid option to access real estate assets at a time when valuations across many of Europe’s property markets are trading at record levels. In the first nine months of 2017, the European real estate debt fund market raised €5.3 billion, surpassing the previous year’s total, according to Real Estate Capital data.
Amundi will bank on the growing interest in private real estate debt as French peers have stepped up their fundraising activity. In September, AXA Investment Managers – Real Assets closed its 10th property debt fund with €1.5 billion raised. Earlier in January, the fund had raised €1.4 billion of capital in just over six months.
AEW and Natixis Asset Management’s partnership, for its part, expects an imminent final close for its second property debt fund, targeting up to €700 million. Other players such as Acofi are now fundraising, with the aim to achieve €600 million of capital through its fifth property debt fund by July 2018.
Four years ago, Amundi had €8 billion in real estate assets. It now manages €23 billion. The French giant hopes it can now take advantage of its access to deal flow, to provide debt applying the same strategy as with equity investing, by focusing on core assets.
“The idea is to benefit from the synergies that we have from the equity side of real estate, as we are a large player in the field,” Arias said.
Amundi’s most prominent property investment in 2017 was the acquisition of the Coeur Défense office complex in Paris’s La Défense business district for €1.3 billion – the largest single commercial property transaction of the year. The purchase was financed through a €900 million debt facility provided by BNP Paribas, Crédit Agricole, ING and Natixis. The seven-year, fixed-rate loan was syndicated to a pool of French and German banks.
“We saw many lenders approaching us as the asset is mature, diversified in terms of tenants and fully let,” said Eric Wohleber, Amundi’s head of real and alternative assets sales.
Arias agrees that the debt market remains liquid, particularly for well-located core European assets, which will be targeted by Amundi’s new property debt fund.
“The price of our loans will be determined by the market. That means around a 2 percent return, but you don’t attract investors today just with returns. You attract investors because the asset class is friendly on capital recovered ratios and provides diversification to investment portfolios,” Arias said.