Geneva-based private banking and asset management firm Union Bancaire Privée has started fundraising for its first dedicated real estate lending vehicle, which will be targeted towards financing residential property across Europe. The firm is looking to raise €300 million for the UBP Social Investment Private Debt Fund.
Speaking to Real Estate Capital Europe, managing director and fund manager of the UBP SIPDF, Colin Greene, explained that the firm has been active in the real estate lending market through its UBP Private Debt Fund series, but the UBP SIPDF will be its first vehicle exclusively focused on real estate lending.
Through the firm’s residential debt vehicle, UBP will focus on originating development and construction loans between €10 million and €40 million “across the residential spectrum” – including multifamily, student housing and senior living – with a loan-to-value ranging between 65-70 percent. The firm will target a gross annual return of base rate plus 8-9 percent.
The UBP vehicle has a pan-European outlook, although it will have a lens on Western Europe and will be focused on procuring loans for a term of two to three years.
Greene added that UBP has brought its latest vehicle to market because “people cannot borrow from the banks the way they used to 10-15 years ago”.
The firm has observed that within the banking system, lending decisions are being called back to head office, in effect “centralising” the decision-making process.
“[Borrowers] are now dealing with the head office. [Banks] are typically looking to do the larger transactions. While we have these trends, the banking system is not providing all of the financing that is required,” he said, adding that this has an adverse repercussion on borrowers looking for smaller loans of between €10 million and €40 million.
UBP also believes that providing a lending product that will target the lack residential assets in Europe is in line with investor demand for environmental, social and governance-themed strategies.
“The current fund that we’re working on is specifically designed to address the housing shortages. The reason for this is because when we speak to institutional investors, they tend to have a preference for an investment theme within the fund,” he said.
Greene added that having a clear theme within ESG – the “social” aspect of this fund – provides investors with an opportunity to allocate to an ESG focused strategy. In view of the social crisis caused by the undersupply of housing across Europe, this fund has a social objective to address housing shortages, he said.
The fund has been accredited as an EU Article 8 vehicle.
Union Bancaire Privée filed the Ireland-domiciled fund in September 2021 but was “hesitant” to begin fundraising in earnest due to the economic uncertainty and market dislocation.
However, UBP raised around €16 million of initial capital for the fund by the time of a “soft close” in August last year, Greene explained, adding that the capital committed in the soft close was higher than the fund’s assets under management.
“We called sufficient capital to close a transaction then paused, awaiting better market conditions, which are now here,” he said.
“The investment backdrop in the latter part of 2022 was very negatively impacted by fears of an energy crisis over the winter and high uncertainty over when the interest rates would peak. We are not out the woods yet, but the investment outlook is much improved.
“There is a general sense that we have turned a corner and there is reasonable visibility on inflation and rates. In short, now is a much better time to market a fund than the back end of last year,” he added.
The firm did not specify when it looks to close the vehicle but emphasised that it will ramp up fundraising this year.