BNP Paribas Asset Management, the asset management arm of the French banking group, has held a first close on its debut debt fund, which is targeting €1 billion by Q4 2018.
The close of the BNP European Real Estate strategy took place in December, Philippe Deloffre (pictured), the firm’s head of real estate debt told PDI‘s sister title, Real Estate Capital. Although the amount of capital raised to date was undisclosed, the firm is understood to have raised several hundred million euros for its real estate and infrastructure lending activities. “We are on track with our targets,” Deloffre said.
The firm has raised capital from an investor base consisting primarily of European institutional investors, pension funds and insurance companies. So far, investor interest has come mainly from France, but there are investors from the Nordic countries.
The firm is working on its first two loans and expects to close €150 million across the deals imminently, Deloffre said.
The closed-ended vehicle will originate senior debt with a European scope, including the Nordics and some central European countries, but excluding the UK for currency reasons. Its loan size will range from €50 million to €100 million, with maturities typically ranging from five to seven years, with the possibility to provide loans of up to 10 years.
BNP Paribas AM is planning to write the majority of loans with a loan-to-value of up to 65 percent, and with margins ranging between 150 and 300 basis points, depending on the country and the type of risk. The firm declined to disclose the fund’s targeted returns, although they will be in line with the European market, Deloffre noted.
The fund can be invested without a specific priority across property sectors in continental Europe, with flexibility within all major commercial real estate asset classes.
“We will target the core countries of the eurozone, and will also consider peripheral countries. Our strategy includes the Nordic countries, also Spain or Italy, and to some extend we have the ability to write loans with exposure to Poland and the Czech Republic,” Deloffre said.
Through its debt vehicle, the firm will deploy capital in the core-plus and core segments, although Deloffre added that the firm is also “very comfortable” with value-add deals.
“You are better off arbitraging the property cycle through value-add assets, especially when the economy has shown some tangible signs of recovery in Europe,” he added. “We believe that newly built or refurbished properties to the highest standard are likely to perform better in an adverse market and we would then focus on property fundamentals.”
The asset management firm’s move into private real estate debt was prompted by the increased investor interest for the asset class, Deloffre said. A spokesman for BNP Paribas said that the asset management business will work with the group’s bank, rather than compete with it, in order to source loans.
As a group, BNP Paribas has significant exposure to the European real estate market. The banking division is one of France’s largest property lenders through its corporate and investment banking functions. The group also comprises BNP Paribas Real Estate, a consultancy business which features a property investment division, BNP Paribas Real Estate Investment Management. The asset management business is a separate entity and its property lending drive represents the group’s first third-party capital lending in the real estate space.
“We operate as an independent asset manager focused on private debt across the sectors. Being part of a group that includes a recognised property adviser enables us to strengthen our analysis of the property market thanks to dedicated research,” Deloffre said.