Tristan targets up to €750m for second debt fund

The London firm, which sold a 31% stake to Candriam Group earlier this year, plans to launch a successor to its TIPS One fund in Q3.

London-based investment management firm Tristan Capital Partners is readying a second real estate debt fund, with the aim of accumulating up to €750 million in equity commitments, as its predecessor Tristan Income Plus Strategy One nears the end of its investment period.

Speaking to affiliate title Real Estate Capital Europe, Dan Pottorff, head of debt investment at Tristan, said the firm expects to fully deploy TIPS One before the third quarter before rolling out a successor, Tristan Income Plus Strategy Two, in Q3.

The firm will aim to raise between €500 million and €750 million in institutional capital and will target returns of between 8-10 percent.

Through the Article 8 fund, Tristan will provide floating rate whole loans of up to 75 percent loan-to-value, across the core-plus and value-add space.

Tristan will aim to replicate the geographical focus of its first fund, by writing loans of between €50 million and €150 million on a pan-European basis. TIPS One was allocated in the UK, France, Netherlands, Finland and Portugal and across a range of asset classes.

Pottorff, who joined the firm from US property manager LaSalle Investment Management in February 2021, said Tristan raised €500 million in equity commitments for TIPS One, and that the firm is “aiming to raise more for this fund [TIPS Two]”.

Debt opportunity

Speaking about the refinancing gap in European markets, Pottorff said: “€150 billion to €200 billion of debt will require refinancing over the next three years, much of which has been loaned on a floating rate basis. Higher leveraged owners, 65 percent plus LTV/those with less conservative capital structures, may get caught in a €50 billion ‘refinancing gap’ as bank risk appetite recedes in the next 12 months.”

Market participants have recognised the need for capital for refinancing maturing loans in the coming months and years. In January, manager AEW Europe reported a refinancing shortfall of an estimated €51 billion in Germany, France and the UK.

“At the same time, current available European real estate debt ‘dry powder’ is estimated to represent less than a third of that gap. Those who are willing to commit capital also have the positive tailwinds of rising interest rates and an increasing cost of credit, even if inflation recedes to near pre-GFC levels.

“[We are] at a very interesting point in the cycle where higher rates and imbalances in the supply of credit could generate historically attractive risk-adjusted debt returns,” he added.

The last reported deal on the TIPS One fund came in April, when the firm provided senior debt financing to London-based manager Clearbell for the refinancing of The Kodak, an office building on Kingsway in London.

Stake sale

In February, affiliate title PERE reported the sale of a 31 percent stake in Tristan to Candriam Group, the European asset management subsidiary of US insurer New York Life.

It follows two prior sales to the same firm. The first was in 2018, when Candriam acquired 40 percent. The second was in 2020, when a further 9 percent was sold.