Sundaram Alternates plans to raise up to Rs 1,500 crore through realty private credit fund, ET RealEstate

June 29, 2023

Sundaram Alternates Assets, a subsidiary of the Sundaram Group, is planning to raise up to Rs 1,500 crore through its fourth real estate private credit fund, the Private Credit High Yield Real Estate Fund IV (RE Credit Fund IV) that will focus on investments in growth and special situation opportunities.

The high yield credit investment fund, in line with its earlier three real estate credit funds, will provide investors access to a diversified portfolio of secured real estate investments, with an emphasis on self-liquidating residential projects.

The total targeted mop up for the fund includes a green-shoe option of Rs 750 crore.

Across its three funds so far, Sundaram Alternate Assets has deployed over Rs 2,000 crores over the last six years at an average 18-20% gross portfolio returns and has been backed by repeat investors in successive funds since 2017.

“This fund allows us to leverage our expertise and market insights to identify compelling investment opportunities in the real estate sector. By focusing on a range of opportunities within the sector, we aim to provide investors with a well-rounded and diversified portfolio,” said Vikaas M Sachdeva, MD at Sundaram Alternates.

The fund will also support last-mile financing, project acquisitions, select rescue financing at superior returns while being secured from a capital protection perspective.

“Our fourth real estate credit fund launch is a strong testament to our track record in this space amidst materially adverse credit events and volatile markets over the last 5-6 years. So, we see no reason to re-invent the wheel and our key underwriting philosophy will continue to centre around protecting our investors’ capital through stringent credit metrics and prudent risk management strategies,” said Karthik Athreya, Director & Head of Strategy, Alternative Credit at Sundaram Alternates.

According to Athreya, the investments from earlier three funds have ensured strong loan-to-value ratios, priority cash flows, and differentiated multi-layered security structures that incentivize timely repayments.

Around 70-75% of the fund’s allocation will be directed towards self-liquidating projects with focus on key south India micro-markets and secured cash flows from post-approval projects thereby ensuring downside protection and regular income streams to investors. The remaining 25-30% will be tactical or opportunistic investments that provide higher returns to boost portfolio performance.

The fund will focus on sub-Rs 100 crore deals that will provide diversification and attractive risk-rewards. It will target gross deal returns ranging between 18-22% on a senior secured basis.

The deal tenors will range from 3-4 years aiming to capture the growth momentum in the sector. Within this tenor, both principal and interest recoveries will be structured on a quarterly basis as part of the fund’s credit risk management.

With the bullish outlook for the real estate sector and robust performance over the last 12 months, the RE Credit Fund IV aims to create a largely growth-oriented portfolio and key developer relationships within the real estate categories of mid-market residential, hybrid and commercial projects with attractive secured returns.

  • Published On Jun 29, 2023 at 08:54 AM IST

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