Caerus beefs up eurozone debt fund by €47m

The Düsseldorf-headquartered Caerus Debt Investments, led by fund specialist and former INREV chairman Michael Morgenroth, has raised an additional €47m for the firm's Archimedes real estate debt fund, bringing the total up to €129m for the fund.

According to Caerus, the new equity commitment for the senior/whole-loan vehicle focused on the eurozone comes from a 'major German insurance company,' and an increase by an existing investor.

The capital injection lifts the equity available to Archimedes to €129 mln. In the first closing, a large German insurance company and a pension fund subscribed a total of €82m to the fund. The fund is expected to have a value of €300m, structured as a pool fund and targeting senior collateralised loans with a loan-to-value ratio of up to 80%. The regional focus is on the core eurozone states, limited to Germany, Austria and Switzerland, as well as the Benelux countries.

Investors can participate via the new Luxembourg-registered Caerus real estate debt fund with a minimum subscription amount of €10m. The target IRR is 3% to 4% per annum.

Michael Morgenroth, CEO of Caerus Debt Investments, said: 'No other asset class currently offers a more attractive risk-return ratio and a higher return, particularly for insurance companies, in relation to the equity securitisation required by Solvency II.'

The Caerus management, led by Michael Morgenroth with Patrick Züchner as chief investment officer, took over and renamed the company in a full management buy-out of the shares formerly held by Signa Holding in 2013. Shareholders in the company included Swiss private bank Reichmuth & Co. and Dupuis Asset Management.

REFIRE: CEO Morgenroth never tires of explaining how both banks and insurers are having to rebuild their capital bases, and indeed their business models as one-stop finance houses, in the shadow of Basel III for the banks and Solvency II for the insurers.

Basel III comes into force in 2019, with banks bracing for a host of new compliance measures, while Solvency II came into effect last year with a 16-year notice period for insurers to fully comply.

Given the current low interest rate climate, insurers are unable to earn the required returns on fixed income instruments such as bonds to meet their long-term obligations – which are often up to 4% on life insurance policies – and so, are being forced to encroach on the banks' traditional lending turf. Banks, meanwhile, are having to curb their own lending to comply with the new capital requirements.

Thus, insurers have little option but to get more involved in property, project development, infrastructure and even corporate investment. German insurers increased their lending to the property sector in 2015 by 41% over 2014, last year saw the trend being reinforced.