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Patron to hold final close for Fund VI by Q4 – Exclusive

The London-based private equity real estate firm has one of the largest European real estate opportunistic funds in market.

Patron Capital Partners is nearing the €800 million target for its latest opportunistic real estate fund, Patron Capital VI, and is aiming to hold a final close by October, PERE has learned.

The London-based pan-European real estate firm declined to comment, but PERE understands Patron has raised a total of €770 million to date, including €650 million in the fund and €120 million in a sidecar vehicle. That figure is expected to rise to €900 million at the final close for Fund VI, which has a €1 billion hard-cap.

The manager launched Fund VI last year and amassed €500 million in an initial close that occurred two to three months ahead of schedule, PERE reported last July. The firm also collected an additional €100 million in the sidecar.

Most of the capital raised since then closed during the covid-19 crisis, according to source familiar with the matter. Patron, which originally had planned to hold a final close for Fund VI in May, saw new investor due diligence delayed by travel restrictions and consequently made the decision in April to extend the fundraising period until October.

PERE understands that 96 percent of the €770 million by amount of capital came from existing investors or existing relationships. More than 80 percent of the equity haul came from limited partners that had backed the firm’s last two funds, the 2016-vintage Fund V and the 2012-vintage Fund IV. Fund V’s capital raise comprised €806 million for the fund and approximately €143 million of co-investment capital while Fund IV, the firm’s largest fund to date, consisted of €780 million for the fund and €320 million of co-investment capital.

Meanwhile, 65 percent of Fund VI’s capital comes from US investors, which predominantly comprise endowments, along with corporate pensions and sovereign wealth funds. The fund’s LPs include the University of Michigan, which committed €45 million to the vehicle in June.

Fund VI’s strategy will be to “make opportunistic and value-oriented investments in distressed and undervalued property assets, loans and corporate entities with substantial underlying property value,” according to a University of Michigan memorandum. Patron intends to create value through the repositioning, redevelopment and active management of real estate assets and operational improvement of corporate entities, the memorandum stated. In terms of distressed opportunities, the firm will primarily be targeting the office, retail and hospitality sectors, as well as healthcare to a lesser extent.

To date, Patron has deployed €5.9 million of Fund VI’s capital in a single investment, the acquisition of apartment assets in Madrid and Barcelona in December. However, the firm currently is in serious discussions on transactions that would amount to 20 percent of the fund’s equity.

Patron’s primary investment strategy, which is focused on Western Europe and comprises 87 percent of invested equity, was generating a gross internal rate of return of 16 percent and 1.56x multiple as of March 31, according to a company presentation in June. Post-global financial crisis, Patron has yielded a 20 percent gross and 1.75x equity multiple, the presentation showed.

PERE understands that Fund IV is currently generating a 24 percent gross IRR and a 1.9x gross multiple, while Fund V is producing a 17 percent IRR and 1.7x multiple.

Fund VI is among the largest European real estate opportunistic funds in market, with StepStone Group’s StepStone Real Estate Partners IV Europe topping the list with the equivalent of a $1.2 billion target, according to PERE data. Patron VI, with a $900 million target, ranks fourth on the list.