Tristan launches €950m value-add fund

Tristan Capital Partners is launching a new €950 mln fund that will invest in value-add opportunities across Europe.

European Property Investors Special Opportunities 4 will target net returns of 15% and invest across all sectors in Europe with the first close expected by the end of the second quarter.

With a maximum loan-to-value of 60%, the fund will have a firepower of almost €2.4 bn.

Early last year, the London-based fund manager capped the final equity raise on its EPISO 3 value-add/opportunistic fund at €950 mln, exceeding its original capital target by 25%. At the time, the company said it had almost €500 mln of unfilled demand for the fund.

Well-informed sources told PropertyEU that Tristan’s new fund may go higher than the targeted €950 mln, but the company's CEO Ric Lewis said the company would limit the size of the fund to ‘a level that the company feels it can rapidly and prudently invest’. ‘We don’t feel the need to maximise the size of any fund as our clients have consistently allowed us to invest reasonably-sized funds and then allowed us to return quickly to ask for more capital if necessary to take advantage of market opportunities.’

With interest rates still at historically low levels and the euro down vis-à-vis the American dollar, real estate continues to offer value to many European and global buyers, Lewis said. ‘But I would want to be a net seller in two to three years time. I think interest rates then could be higher.’

Elephant and snake
For now, however, broken assets continue to offer a significant discount to what investors are prepared to pay once they have been repaired, he added. Comparing the flow of distressed loans and assets in the European real estate market to ‘a huge elephant trapped in a snake’, Lewis said the elephant had moved about a third of the way through. ‘There’s still a lot to come out of the snake and more to do,’ he said.

Despite the wall of capital bearing down on Europe, Lewis said there were no ‘crazy over-the-top bacchanal celebrations going on like we witnessed in other cycles’. ‘That is a pleasant surprise. But,’ he added, ‘I would bet everything I have on stupidity coming back to the market. It's not a question of if, it's when. It’s coming. It’s not now but there’s no question it's coming.’

For EPISO 3, Tristan has so far made 25 investments at an average yield of 8.6%. Half the purchases were in retail property, more than in previous funds, in which retail accounted for around a third of the portfolios.

Earlier this year, the company announced it had forked out in excess of €450 mln for a package of deals including a neighbourhood shopping centre in Berlin and a mixed-use building in the centre of Munich.

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Tristan Capital Partners features in 31st place in PropertyEU's Top Investors ranking of dealmakers by transaction volume in 2014. Check out the Top Investors App for the ranking and background information on the top European dealmakers of 2014.