Hedge fund Chenavari Investment Managers is one of the latest firms planning to raise lower-return money to lend on senior debt.
The credit investor plans to tap a separate investor base to the hedge fund business and offer debt on good-quality secondary property, making long-term loans on an 8-10% return basis from next year.
It is currently looking at a B notes portfolio secured by senior residential loans in Frankfurt and Berlin; and two senior UK retail bridging loans outside London.
It provided a £13m, 18-month bridging loan with a 1.5% monthly coupon for residential developer Northacre Group.
Its property debt fund has made 16 investments, mostly in the UK and Germany, 65% of which are new loans and 35% CMBS and secondary purchases.
In a senior deal, Chenavari would typically provide a two- to three-year loan at an 85% loan-to-value ratio to get 8% paid interest and a 15% return.
With access to €100m by the end of this year, it plans to have invested the €250m it raised last November.