FRANCE – Fund manager La Française REM has raised €150m from French clients of Credit Mutuel in the first closing of LFP Créances Immobilières, a senior property debt fund with a target size of €300m-500m.  

The fund, which will target French office and retail, has so far closed one deal – a €20m, five-year loan acquired from a bank – although the fund manager said it expected to close three more deals with borrowers within months.

Existing bank loans make up one of two main channels for assets.

La Française will also originate new loans with property lenders, potentially including as a participant in club deals.

Assets targeted for the fund will be sized between €20m and 40m to ensure diversification, although it could stretch to €50m-75m where loans are backed by a diversified portfolio.

A spokeswoman for the fund manager said: "We must admit the deal flow is not as easy as the real estate industry thought two or three years ago.

"Globally, the 'extend and pretend' policy gives time to the borrowers and decreases the investment volumes.

"However, the good health of the French real estate market compared with other European countries continues to drive capital, and the volumes are fairly stable."

The fund manager has structured the vehicle to minimise capital consumption under Solvency II provisions.

It is targeting French institutions – mainly insurers – via a domestic FCT feeder structure and cross-border investors with a Luxembourg securitisation structure (Lux ST), which will share the underlying loan portfolio and carries operating expenses but no fees.

The spokeswoman added that the fund manager, which is in discussions with several French institutional investors, was confident of a second closing in the second quarter.

"Knowing that the geographic focus of the strategy relies on loans backed by French real estate assets, our 'natural' target is French investors," she said.

"[But], whether debt or equity, the French real estate market is on the radar of many [international] players."

In the medium term, La Française plans to extend its debt platform to infrastructure and other real assets subject to a stable regulatory environment.

In the meantime, the spokeswoman said it would dedicate itself to real estate as "the most attractive asset class right now".