iii-Investments launches new €300m debt fund, first deal done
Reinhard Mattern, the head of iii-Investments, the Munich-based funds subsidiary of HypoVereinsbank and ultimately Unicredit, took time out recently to explain his company’s philosophy to the Immpresseclub e.V, Germany’s inofficial association of real estate journalists, at a gathering in Frankfurt.
The Immpresseclub meets twice a year in different German cities, and – in addition to offering staff and freelance journalists a forum for discussing common interests - provides a useful opportunity for company bosses to highlight aspects of their business that might not normally merit headlines, in a fairly relaxed and convivial environment.
We reported some months ago in REFIRE on iii-Investments’ first debt fund, a German Spezialfonds into which a single large institutional investor committed €200m. Mattern said the company has now raised a further €100m in equity for its second debt fund from insurance companies and pension funds, and is targeting a full volume of €300m. He added that iii has now made its first loan purchase, marking the first time that a pure debt fund has taken a sizeable share in a large German property transaction.
The deal is a €30m syndicated loan for the acquisition of a residential portfolio in North Rhine-Westphalia. The loan was arranged by Deutsche Bank, and iii purchased the junior tranche with a term of 10 years. The purchased loan will be spread equally over the two debt funds. “With this contribution to the financing of a widely diversified residential portfolio we have succeeded in making our first debt purchase on attractive terms,” said Mattern. “As we have received a number of further interesting enquiries from different banks, we are optimistic about being able to place our investors’ capital swiftly.”
The second fund is a pool fund, and like the first, is investing in debt backed by low-risk properties mainly in Germany (with some in other eurozone countries), with a little medium-risk thrown in to spice up returns. Loan sizes will be typically €10m to €40m.
iii-Investments’ move aims to profit from two key trends. Firstly, banks facing stricter regulations are looking for buyers for their long-term real estate loans to ease pressure on their capital requirements; and secondly, insurers and pension funds are looking for higher yields (Mattern’s fund is offering 4%) than they can currently get on low-return bonds in a low interest rate environment. Nonetheless, Mattern said his funds’ approach was much more risk-averse than comparable Anglo-Saxon debt funds. iii-Investments already manages €4bn for institutions in 10 German Spezialfonds and two Luxembourg vehicles.