Spanish real estate manager Azora and alternative lender Oquendo Capital have teamed up to launch a lending platform in Spain that complements the traditional banking finance space.
The platform’s first fund has a target fundraising of €300 million, which is likely to be raised by the end of this year, PDI‘s sister title Real Estate Capital understands. At the same time, the partnership is expecting to raise another €300 million in separate accounts.
“We are in conversation with prospective investors who are seeking access to a local deal flow to have exposure to smaller transactions and diversify their real estate equity investments through debt,” said Cristina García-Peri of Azora.
“We have not closed any commitment yet, but we are seeing strong interest from institutional investors familiarised with real estate, as well as family offices and private banks seeking attractive risk-adjusted returns,” she added.
Through the fund, with a net target return of up to 9 percent, the firm will aim to offer flexible loans for small- and medium-sized real estate transactions with a moderate risk profile. So far, the pipeline of deals has a risk profile ranging from 50 percent to 60 percent loan-to-cost.
The fund aims to complement banks’ financing, rather than competing with the banking space. For instance, capital can be deployed to finance projects that do not generate immediate rental income. Through the vehicle, the firm will also be able to team up with banks in schemes where it can provide more aggressive financing, complementing banks’ debt.
Besides financings with a short-term maturity provided through its main vehicle, the platform’s separate accounts will offer loans with longer maturities and a lower risk/return profile. Real Estate Capital understands that the Azora-Oquendo partnership will be able to finance transactions from a 5-6 percent to a low double-digit return.
The firm expects to attract separate accounts from large institutional international investors, while the fund will also attract Spanish capital.
The alternative lending space is gaining traction in Spain with firms such as Ibero Capital, Incus Capital or Avenue Capital actively providing debt liquidity where the banks do not lend, such as deals involving land purchases for residential developments. Developers opting for debt funds to finance land purchases are currently paying between 8 percent and 12 percent in interest, for transactions with LTCs ranging between 50 percent and 100 percent, a Spanish developer told Real Estate Capital recently.