RiverRock launches €200m mezzanine fund for German B-cities

The UK-headquartered RiverRock European Capital Partners has launched its first real estate mezzanine debt fund for German commercial real estate, raising investment capital from European and Middle Eastern institutional and family office investors.

The fund, RiverRock European Real Estate Fund (RREREF), is targeting a volume of €200m and will invest in newly-originated mezzanine debt transactions in value-add or manage-to-core commercial real estate in Europe, with a principal focus on prime locations in Germany's second-tier or B-locations.

The fund will be managed by Nicolaus Harnack and Franz Lucien Moersdorf. Harnack has been leading RiverRock’s real estate business since 2013, prior to which he was responsible for Credit Suisse / Situs real estate finance due diligence business in Europe. Moersdorf was, until 2010, head of Deka Immobilien and WestInvest, and has since been managing his own asset management boutique in Frankfurt. The two have known each other since working together in the cross-border investment business at Richard Ellis in the late 1990s.

According to Harnack, the RREREF will focus on retail, office and logistics properties, with hotels also a possibility, and residential only as part of a mixed-use asset. What the fund is really looking for are assets requiring revitalisation, refurbishment and other active asset management to boost value – with the key criteria that they are already generating cash flow i.e. not speculative developments.

The fund will look to provide mezzanine finance, filling the gap between the senior loan and the owner's equity. Typical loans will have a size of €5m to €15m and a duration of 2-4 years. Current-pay interest rates and any back-ended deferred payment will depend on the individual deal characteristics and risk profile.

Harnack added, “We see attractive mezzanine investment opportunities in Germany, particularly in transactions where greater flexibility and a willingness to work with the owner is required. A more rigorous regulatory regime has also reduced the willingness of many larger lenders to look positively at smaller markets.”

RiverRock, founded in London in 2009, is a merchant banking company focusing on high yielding asset management, corporate finance & advisory, and alternative investment strategies. The firm has some €650 million of assets under management.