French alternative investment management firm Zencap Asset Management is aiming to raise its largest real estate debt fund to date, with a target of €500 million for the fourth iteration of its property credit strategy.
Speaking to Real Estate Capital Europe, Richard Jacquet, chief executive officer at Zencap, said the firm is planning to launch the fund, Zencap Real Estate Debt 4, during the first half of 2024. It is currently investing through its third fund, which it closed on €300 million in 2021.
The firm is aiming to achieve a 10 percent net internal rate of return for its investors through the fourth vehicle. Zencap plans to provide what it describes as ‘uni-tranche’ – whole loans – and mezzanine facilities across continental Europe. It will originate loans in the mid-market range between €20 million and €50 million.
Zencap closed its maiden real estate debt fund in 2013, raising €50 million from investors. Its second fund closed on €245 million in 2017.
The firm’s third fund is around two-thirds invested. Zencap intended to raise between €200 million and €300 million for Fund 3 and closed at the top end of the expected range. It expects to have this vintage fully deployed before the launch of the successor, Jacquet added.
Jacquet acknowledged the fundraising market is strained by the denominator effect on investors’ portfolios. However, he said Zencap is aiming to raise its largest vehicle to date because it views the investment opportunities in real estate debt, not limited to distressed assets, as “huge”.
It is widely recognised that European markets face a refinancing shortfall for loans secured against real estate. Last month, manager AEW reported a debt funding gap for six key European markets in the order of €93 billion in the 2023-26 period.
He added that ideally the firm would look to launch Fund 4 in Q1 next year; however, this is dependent on how quickly the firm can deploy the rest of the capital in Fund 3, which “depends on the market conditions”.