Boston-headquartered investment management firm Bain Capital is targeting Europe’s real estate debt market with the launch of its first dedicated strategy for the asset class.
A source with knowledge of the situation told affiliate title Real Estate Capital Europe that Bain is aiming to raise €400 million in the first instance for the strategy. It is understood the capital will be raised through a separately managed account.
To date, the firm has invested in European real estate credit through its diversified credit series, Bain Special Situations Europe. Its first fund closed on €1.22 billion in 2019. The most recent fund in the series – Bain Special Situations Europe II – for which it is targeting €1 billion, had a first close in August 2022 on €473 million.
The source said that through this series, Bain has built a European property loan book of around €500 million.
In addition to the €400 million it is aiming to raise from a single investor, Bain is also understood to be speaking to two or three additional investors about potential commitments, the source added.
Through the strategy, Bain will have a pan-European geographic focus, with a bias towards the German, Spanish, and Irish property markets. The firm will provide senior, stretch-senior and mezzanine loans ranging between €15 million and €100 million.
Bain declined to comment on the strategy. However, speaking separately to Real Estate Capital Europe about the debt opportunity in Europe, Fabio Longo, partner at Bain Capital, said there is demand from sponsors for debt to refinance construction loans in the current market.
“We see bridge-to-sale opportunities, where we refinance incumbent transitional debt –development or capex facilities – to bridge a future sale when investment market conditions are more supportive,” he said.
He added that the real estate debt opportunity is due to traditional lenders retrenching and a refinancing shortfall looming. Last month, manager AEW reported a debt funding gap for six key European markets in the order of €93 billion in the 2023-26 period.
Moreover, Longo argued traditional lenders are unlikely to be willing to offer additional loan extensions in the coming months. “[Bank] lenders are increasingly unwilling to roll near-term maturities, having previously provided term extensions through the covid-impacted period, and again into 2022 as inflation and short-term rate volatility peaked,” he added.
“We are able to take a flexible approach to interest coverage and other key leverage metrics, to provide a structured solution to borrowers, where a debt refinancing with a traditional bank lender is constrained, by having a rolling interest reserve or a shortfall guarantee,” he added.