Exclusive: Patrimonium moving into CRE debt

The Swiss-based real estate investor and corporate debt provider is leveraging its existing skill set to move into commercial real estate lending.

Patrimonium has received approval for its new Luxembourg-registered commercial real estate debt fund.

Daniel Heine, managing director, private debt and private equity, told PDI that fundraising has not officially launched but the closed-end fund has a target of around €300 million.

The new vehicle will focus on the lower mid-market with transaction sizes ranging from €5 million to €30 million. The net return target is between 6 and 7 percent and Heine anticipates a weighted average LTV of around 80 percent. 

He said the strategy was a natural evolution for Patrimonium, pointing to the firm’s large real estate investment strategy, which is a core part of its business, and in-house expertise. 

Key to the decision was the number of reverse inquiries from Patrimonium’s network of advisers who help source deals for its mid-market corporate direct lending strategy. The same brokers and advisers that refer business owners to Patrimonium’s direct lending fund for financing were also seeking debt to back commercial properties with higher loan-to-value (LTV) ratios than are available from banks. 

“[The real estate financing gap] is exactly the same as the mid-market corporate financing gap … regulation has forced the traditional lenders to reduce loan-to-value [ratios],” added Heine. 

Post-crisis, the German-speaking DACHs region, and Germany in particular, has one of the most competitive real estate lending markets on the continent, Heine said. 

However, the international and regional Landesbanken that provide much of the first lien senior debt focus on LTVs under around 60 percent, he said. Patrimonium spies an opportunity to step in with second-ranked debt above that level. 

DIRECT LENDING

The firm’s more established lending vehicle is also in fundraising mode. The Luxembourg-domiciled Patrimonium Middle Market Debt Fund was raised with €200 million in commitments and a new sub-fund with fresh capital will be established in the coming weeks, Heine said. 

SICAV SIF is structured as a closed-ended vehicle but as new allocations are raised, whether from a single investor or on a commingled basis, Patrimonium can create new sub funds to accommodate the capital which is then invested pro rata, said Heine. 

The DACHs-focused vehicle makes senior secured loans to lower mid-market borrowers. Private equity portfolio companies are not excluded as borrowers but the vehicle is yet to lend to a PE-backed firm. 

Heine said the firm’s strategy of exploiting local opportunities as well as the language barrier typically precludes competition from private lenders flying in from London or elsewhere. 

Patrimonium is headquartered in Switzerland and invests locally as well as into Austria and Germany. Its three core businesses are real estate, private equity and private debt. Heine is one of three co-founders and the firm including affiliates had almost €2 billion in assets under management, as of the end of March.