ARA European Real Estate Debt Fund Raises €200M

ARA Venn, the European real estate debt fund manager controlled by ARA Asset Management, said yesterday it has raised €200 million ($225 million) for Venn Commercial Real Estate Fund II (VeCREF II), marking an initial closing for its first investment vehicle since the Singapore-based firm took over the company six months ago.

ARA Asset Management, which manages S$88 billion ($63 billion) globally, participated in the fund raising exercise as a cornerstone investor along with other institutional investors which had also backed the firm’s predecessor fund, VeCREF I, which deployed €520 million through 24 commercial real estate loans across Europe.

Aiming for a net internal rate of return in the “mid to high single digits” and regular quarterly income distributions for its investors, VeCREF II will invest in whole loans backed by commercial real estate assets across Western Europe, ARA Venn said in a statement released on Monday. The venture will target all asset classes including residential and alternative properties in France, Germany, Ireland, the Netherlands, Spain and the UK.

Seeing Opportunity Amid Uncertainty

“We are delighted to have successfully reached the first close of VeCREF II, particularly in an uncertain market environment which we believe will be very interesting for non-bank lenders who are unencumbered by legacy loan assets and who will therefore be able to assist with financing requirements when others are less able to,” said Paul House, joint managing partner and head of the commercial real estate team for Venn ARA.

House indicated that, given the long duration of the fund and its investment approach, the uncertainty bred by the coronavirus pandemic may provide an opening for VeCREF II to close deals as other players wait to see how the market develops.

“We are focused on senior ranking loans and since the Covid-19 outbreak, we have seen investment opportunities increase significantly as a result of a number of lenders pausing their loans to work on their existing portfolios,” House said in comments to Mingtiandi.

The ARA Venn boss noted that margins on investments have gone up since the crisis began and said that credit metrics have improved, both conditions that the company sees as favourable for deploying capital.

The UK-based fund manager is not the only firm seeing opportunities in Europe despite the economic fallout from the COVID-19 pandemic. Toronto-based Granite Real Estate Investment Trust, which recently raised C$789 million ($580 million) through debt and equity deals, is poised to resume asset purchases in Europe and the US  amid a growing demand for storage and warehouse space in developed economies.

ARA Venn said it is currently evaluating opportunities to deploy VeCREF II’s maiden funding, without providing specific targets. “We are currently analysing a number of exciting opportunities to deploy capital into a market which promises to be very attractive for real estate debt in relative value terms,” said Beatrice Dupont, a partner in the firm’s commercial real estate team.

ARA’s Global Diversification Marches On

Led by veteran investor John Lim, ARA Asset Management has been diversifying its portfolio across new markets in Europe, Australia and Asia in recent years.

The Warburg Pincus-backed fund manager took a majority stake in ARA Venn last December five months after it set up an equity management partnership in the UK together with London-based Dunedin Property Asset Management.

In June, the firm mounted a hostile takeover of ASX-listed Cromwell Property Group, marking the latest development in a more than two-year struggle for control of the Australian investment group.

This week, Minterest, an online financial services company backed by ARA Asset Management, raised S$5 million within a day of launching its second real estate investment product. The funds will be invested in the ARA-Shinyoung REIT, owner of a mixed use residential retail property in Seoul’s Dongdaemun shopping district.

At present, ARA Asset Management has assets in over 100 cities across 28 countries, and offices in Australia, China, Hong Kong, Malaysia, South Korea, the UK and US, in addition to its headquarters in Singapore, according to its website.