French asset manager Amundi will hold an imminent first close of around €150 million for its debut real estate debt fund, Bertrand Carrez, head of the firm’s real estate debt strategy has told PDI‘s sister title, Real Estate Capital.
The fund’s first close is expected towards the end of this month or the start of February, Carrez said. Another €100 million of additional investor commitments to the vehicle, which was launched last May, are under due diligence. Amundi expects to hold a final close on €500 million by the end of this year.
The fund has already deployed €120 million across four loans with a loan-to-value of between 60 and 65 percent, which are delivering a return for the vehicle of more than 2 percent, Carrez said. Amundi’s property debt strategy is currently targeting net returns of 2-2.25 percent.
“We have secured these four transactions across France, Italy and the Netherlands, which are backing assets including offices, hotels and a multi-asset portfolio,” he said. “So far, we have deployed capital against core assets which are quite defensive but, for our next investments, we might target higher-yielding financings.”
Amundi is currently analysing a pipeline of additional deals totalling €100 million, Carrez noted.
Despite falling real estate debt fundraising volumes in 2018 – down in Europe by 46 percent to $5.74 billion – Carrez does not see reluctance from investors towards real estate debt, as they increasingly see the asset class as a way of investing defensively at the top of the property cycle.
“We see an increasing number of investors considering allocations to real estate debt versus investing directly into property, as they are questioning the cycle,” Carrez said.
“Investors find in private real estate debt an interesting diversifying asset class, on top of offering a margin premium against the bond market.”
Amundi’s property debt fund has attracted commitments from insurance companies and pension funds, particularly from France. The strategy is raising capital from investors “seeking regular income, limited volatility and capital preservation,” Thierry Vallière, the firm’s global head of private debt, told Real Estate Capital last June.
Through the vehicle, Amundi provides loans with floating rates of interest to offer a hedge against rising interest rates. The sweet spot for lending is between €30 million and €50 million per asset, with leverage between 50 percent and 70 percent.
The strategy has a flexible approach, allowing the asset manager to deploy capital in alternative asset classes as well as multiple countries within the eurozone. Amundi’s core markets for its property debt vehicle are France, Germany and the Netherlands, but the asset manager can also lend in alternative jurisdictions like southern Europe, which is currently offering a margin premium compared to more stablished real estate markets.
“Currently, the yield premium is a bit more substantial in Italy than in Spain, because of the Italian political situation,” Carrez said. “Although margins are decreasing in Spain due to higher competition among lenders, you still might secure 20-40 basis points of additional return versus what you should get in France or Germany for the same kind of risk.”
Amundi will focus on deals involving core and core-plus assets in alternative jurisdictions, while value-add financings will be more likely within the strategy’s core markets, Carrez added.