Sundaram Alternate Assets Ltd, a subsidiary of Sundaram Asset Management Company Ltd, has hit the road to raise its fourth real estate-focused private credit fund.
Through this fund, Sundaram Alternates aims to raise about Rs 1,500 crore ($183 million), including a green shoe option of Rs 750 crore. That's far bigger than the target size of its third real estate PE fund.
Like its previous investment vehicles, the Sundaram Alternative Opportunities Series – High Yield Secured Real Estate Fund IV aims to invest in a senior secured debt structure, aiming to fetch gross returns in the 18-20% range. The fund has a five-year tenure, with average investments maturing within three to four years.
It looks to make deals below Rs 100-crore, investing almost three-fourths of the total corpus in self-liquidating residential projects predominantly in South India’s micro markets including Chennai, Bengaluru, Hyderabad at a brownfield stage when most land approvals have been received. The rest of the corpus will be invested in opportunistic deals including last-mile financing, project acquisitions, select rescue financing, among others, to act as ‘yield kickers’ for the overall portfolio, the company said.
According to Karthik Athreya, director and head of strategy - alternative credit, at Sundaram Alternates, investing in special situation opportunities is, “a two-fold objective; one is to compensate for better quality credit and secondly, on a base-case basis, to provide a yield kicker on the fund so that we (Sundaram Alternates) can constantly keep pushing the gross portfolio return at north of 18%.”
Athreya said that Sundaram Alternates typically raises about 95% of the capital from domestic limited partners (LPs), including high net-worth individuals (HNIs), family offices, insurance companies, and corporate treasuries, among others.
Sundaram Alternates floated its first real estate fund in 2017, raising about Rs 400 crore. This has been fully returned to investors offering about 15% returns, the company said.
This was followed by the second fund’s launch in 2021, which set out to raise about Rs 435 crore, fetching about 16-17% returns to investors. Capital distribution for the fund will start shortly, it said.
For its third real estate-focused fund, Sundaram Alternates managed to mark the final close in October last year, at about Rs 560 crore. This fund is close to being fully invested. The target corpus for this fund was about Rs 1,000 crore, including a green shoe option of Rs 250 crore.
In January, the asset management firm marked the first close of its maiden corporate credit fund at about Rs 205 crore. With a target corpus of Rs 500 crore, the Sundaram Emerging Corporate Credit Opportunities Fund – Series I will invest in high-yielding debentures and mezzanine securities.
