Fund manager AEW Europe is working on plans for a €500m (£417m) senior debt fund as traditional lenders remain constrained.
The firm is in talks with initial investors willing to commit up to €200m of capital to the new vehicle. A first close is envisaged for later this year.
AEW plans to act as a syndication partner for existing banks, rather than setting up a large origination team of its own. The fund would take €10m-€50m pieces of larger loans originated by European banks as activity picks up.
Returns are expected to be around 5%, given that the fund would be investing in senior debt loans with loan-to-value ratios of up to 60%, rather than the riskier mezzanine slice.
Sources familiar with the plans said the move into the debt space was a response to demand from fixed-income teams at insurance firms and pension fund clients, which are attracted to the return profile of debt investment.
AEW’s London-based chief investment officer Rob Wilkinson is overseeing the plan, working with the investor relations team in the firm’s Paris office.
Cushman & Wakefield’s European head of corporate finance, Michael Lindsay, this week described the arrival of such funds as the “bright star” in an otherwise sparse lending landscape (see below).
Others moving into the senior debt space include private equity firm Starwood Capital, which is in the market to raise up to £1bn for a fund, and Aeriance Investments, which is planning a €500m fund.
? AEW also plans to capitalise on opportunities to invest in distressed property by setting up another new fund. It aims to raise €350m of equity, with a first close targeted before the end of the year.
Bridget.o’connell@estatesgazette.com
