New AEW €750 mln European debt fund to focus on offices

AEW Europe’s new €750 mln European debt fund, Senior European Loan Fund 2 (SELF 2), will primarily underwrite office loans in key European markets, the group’s new Paris-based head of debt funds management in Europe, Cyril Hoyaux, told PropertyEU this week.

‘We will consider underwriting loans in major metropolises and, under certain conditions, in secondary cities,’ Hoyaux said. ‘In terms of allocation, we expect around 50% of the loans to be on offices, largely in mature markets, with around 30% to 40% on asset classes such as retail, logistics, multifamily and light industrial properties. The remaining part will be invested in alternative assets, such as student housing and hotels.’

Around 40% of SELF 2 will be invested in France, Germany and the UK, according to Hoyaux, even though ‘Germany remains a fairly challenging market, given the level of spreads’. ‘We will also look at underwriting loans in Spain, Italy, Poland and the Benelux countries in order to build up a pan-European loan portfolio,’ he added. The fund is also able to finance the acquisition of pan-European portfolios.

First closing in December
Fundraising will start later in September, with a view to having the first closing in mid-December, Hoyaux added. The fund will run for at least seven years. Hoyaux hopes the new fund will attract traditional institutional French investors as well as other European institutional investors and even non-European investors, including Asian ones.

AEW Europe is launching SELF 2 because its predecessor SELF 1 (a €323 mln vehicle launched in 2012) is now fully invested in France, the UK, Germany and Italy. Around half of SELF 1 is invested in France. ‘Our objective with SELF 2 is to do the same, albeit on a bigger scale,’ Hoyaux said.

‘We would typically underwrite loans of between €20 mln and €100 mln. The general rule is that no loan should be in excess of 15% of our €750 mln target size for SELF 2. We could offer LTVS of up to 75% on core assets in prime locations,’ Hoyaux said.

AEW is already eyeing investment opportunities for SELF 2, with a view to making the fund’s first investment early next year, according to Hoyaux. ‘In the meantime, we keep on looking for investment opportunities in the debt market for our wider debt platform,’ he said.

Hoyaux joins AEW Europe from JLL France, where he was co-director and co-founder of its debt advisory platform.