Sundaram Alternates, the alternative investment arm of Sundaram Asset Management Company Ltd, today launched Sundaram Alternative Opportunities High Yield Secured Real Estate Fund III.
The real estate focused fund is a 5-year close-ended Category II alternative investment fund (AIF).
The fund will invest in debentures and mezzanine securities of Indian entities backed by real assets that may include real estate, logistics, hotels and healthcare facilities. The investments will predominantly be backed by hard real estate collaterals, access to cash flows and other securities designed to protect capital and return attractive IRRs (internal rates of return) on a gross basis.
The fund will invest predominantly in South India with opportunistic investments in Maharashtra and NCR.
“Sundaram Alternative Opportunities High Yield Secured Real Estate Fund III will allow investors to take advantage of the attractive opportunities in the real estate space. There is a growing requirement of space from education, healthcare, e-commerce, and logistics sectors. Residential real estate is also expected to grow significantly, with the central government’s aim to build 20 million affordable homes by 2022. By 2025, the real estate sector is projected to represent 13% of India’s GDP. The time is ripe for an entry into this space," said Sunil Subramaniam, managing director, Sundaram Asset Management Company.
“Built on the foundation of our two existing real estate funds and leveraging the expertise of the investment committee and the Sundaram Group, the fund will invest in secured high yield deals -- self-liquidating real estate projects and those with secured asset cash flows backed by commercial assets and other collaterals with back-ended redemption structures,” said Vijayendiran R, chief executive officer, Sundaram Alternates.
The fund’s target size is Rs 750 crore plus a green shoe option of Rs 250 crore.
Karthik Athreya is the head of strategy (alternative credit) and the fund will be managed by Kumaran Chandrasekaran. The fund is open for subscription to domestic and international sophisticated investors.
Sundaram Alternates currently manages two real estate funds. With a gross portfolio IRR of 19%, High-Yield Secured Debt Fund I has repaid 61% of capital in less than 3 years since final closing.
High-Yield Secured Debt Fund-II was recently closed and is currently in the phase of active portfolio construction. The fund has already distributed income amounting to 10.3% of drawn capital to its investors as interest coupons over the last one-plus year.