Private bank is seed investor for fund with €300m equity raising target
Michael Morgenroth’s Caerus Debt Investments has secured €20m of seed capital for a €300m mezzanine loan fund and expects to hold a first closing before the end of the year.
Swiss private bank Reichmuth & Co is the cornerstone investor, having invested in real estate debt previously, and is “interested in marketing the product to its clients”, according to Caerus’s founder Morgenroth.
The Swiss group has also bought a minority stake in Caerus, along with Berlin-based Dupuis Asset Management.
Caerus is in talks with the likes of Dutch pension funds and Scandinavian investors, although its investors are likely to be German at its first closing.
It is targeting returns in the early teens – net 10-12% to investors – with quarterly distributions of a minimum 6%.
The fund is concentrating on the German-speaking regions (Germany, Austria, Switzerland) which, “compared with other countries, have some catching up to do with regard to discovering real estate debt as an attractive asset class”, Morgenroth said.
“There aren’t many German- based debt fund managers. Coming from the institutional side ourselves, we do know the needs of institutional investors.”
The business began in May 2012 under the roof of SIGNA. Morgenroth led a management buyout in July.
It is negotiating on two deals from the seed investment.
Caerus is focusing on the 50-80% loan-to-value ratio range. Typical loan sizes will be €10m-30m and it will finance properties worth between around €50m and €150m in the multi-family housing, office, retail, logistics and hotel sectors.
It is seeking assets with stabilised cash flows, good locations and big cities where “often, funding structures are a bit complex”.
The rationale for the fund is partly due to the regulatory changes in Basel III and Solvency II,
which restricts bank lending and makes it more expensive for insurers to invest in equity real estate.
Morgenroth said: “There is no lack of senior debt in Germany from banks, at very attractive rates. But depending on the type of property, above 60-65% or sometimes even 50% LTVs it’s difficult.”