BF.capital launches new institutional real estate debt fund

BF.capital GmbH, an investment house specializing in private debt for institutional investors, has initiated the fundraising for its new real estate debt fund, BF.capital Real Estate Debt Fund II. The fund aims to raise €300 million or more, targeting an average distribution and net return of approximately six percent. Structured as a Luxembourg SICAV-RAIF, the fund has an eight-year term with two one-year renewal options. It is intended for institutional investors with a minimum investment requirement of €5 million and is classified as an Article 8 fund under the EU’s Sustainable Finance Disclosure Regulation (SFDR).

The fund will focus on investing in whole loans or senior loans, with at least 80 percent of its volume allocated to loans for properties with value-added potential. “Our focus will be on manage-to-core or manage-to-green investments, such as repositioning properties, repurposing for alternative use, adding extra floors, or infill densification. We will consider both environmental aspects and our social responsibility when selecting projects, particularly in residential, community-related uses, and social infrastructure,” said Manuel Köppel, Managing Director of BF.capital. Additionally, up to 20 percent of the fund’s volume may be invested in ESG-compliant property developments with market-adjusted parameters.

Köppel highlighted the current market conditions as favorable for anti-cyclical investments through real estate debt funds. “Currently, real estate loans offer relatively high yields, moderate loan-to-value ratios, and market-adjusted value assessments, providing excellent risk-return opportunities,” he said.

Pascal Scheeff, Head of Sales at BF.capital, emphasized the advantages of real estate debt funds over direct real estate investments. “Investors benefit from higher interest rates and credit spreads while still engaging in the real estate sector. Real estate debt contributes to portfolio diversification, offering stable payout expectations and an attractive illiquidity premium, resulting in a better risk-return profile compared to liquid fixed-income investments,” Scheeff noted.

The fund is being marketed with the assistance of Placecap, a specialist in fundraising, which sees this as an exciting investment opportunity, given BF.capital’s strong network in the German market.

Currently, BF.capital manages around €500 million in the real estate debt segment, with total assets under management exceeding €1.5 billion, including corporate and infrastructure financing.