Tristan closes €170m for 18% IRR-seeking fund with potential €1.8bn spending power

Tristan Capital Partners, the pan-European private equity real estate firm, has raised more than €170m of capital in a first closing for the latest distressed asset targeting fund which could have a final leveraged spending power of up to €1.875bn.

Screen shot 2012-12-06 at 22.10.41The European Property Investors Special Opportunities 3 Fund (EPISO 3) has a gearing ceiling of 60%, which would take the initial top-end spending power to €425m, while the final unleveraged €750m equity could provide up to €1.875bn if all deals are leveraged at the stated LTV ceiling.

In previous funds, Tristan has sourced senior debt from a range of banks including Royal Bank of Scotland International, Deutsche Pfandbriefbank and DekaBank.

EPISO 3 will target investment opportunities across the four major real estate sectors – office, logistics, retail and residential – across Western and Central European markets, which endure through the continuing restructuring in distressed markets.

The early first closing of EPISO 3 was held to secure capital for the acquisition of two assets – one each in the UK and Germany – for which Tristan has secured exclusivity.

EPISO 3 will seek internal rates of return (IRRs) of between 15% and 18% over a four to eight-year investment period.

Tristan’s first closing was completed in four months with seven underlying investors, including five investors from previous joint venture funds and two new clients.

Ric Lewis, CEO at Tristan Capital Partners, said: “Tristan never subscribed to the prevailing market view during the Eurozone financial crisis that predicted the end of the EU and the European monetary union.

“To the contrary, we believe that the severe risk aversion of many investors, combined with an enduring shortage of equity and debt capital and a historically low volume of new developments, have combined to create a favourable investment environment in Europe.

“Furthermore, we think that prudent risk-taking by those with the capital, creativity, and discipline to avail themselves of the opportunities in coming months as Europe travels down a long and uneven path to economic recovery may be as good as we have witnessed in the last several years.”

Simon Martin, head of research and strategy at Tristan, said: “Tristan’s belief that the market opportunity in Europe that is emerging is now becoming more obvious in the value-added [and] opportunistic space, mirrors our view 18 months ago that there was a significant capital gap further down the risk-return spectrum in Europe between core and opportunistic investment strategies.”

Tristan’s most recent fund Curzon Capital Partners III (CCPIII) a core plus fund, completed a final closing in February after raising €420m in equity, providing a total spending power of just over €1bn on a 60% leverage basis.

In a previous joint venture CCPIII deal, in a joint venture with Morgan Garfield and Mark Robinson’s Ellandi, Tristan bought a nominally-valued £44.6m Project Royal loan from Lone Star for around £20m in June.

The legacy Bank of Scotland loan reflects a wholesale-to-retail asset acquisition which private equity fund manager’s like Tristan turn to secure investment opportunities.

Tristan has now committed more than 70% of CCPIII’s equity capital through 17 transactions and acquired more than €1bn in assets across Europe since the inception of CCPIII.

About CoStar News

Finance Editor, CoStar News
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