Sundaram High Yield Secured Real Estate Fund III, a recent private credit offering from Sundaram Alternates (part of the Triple A rated Sundaram Finance Group), is the third series of AIF Cat II funds that will invest into senior secured credit of real estate developers based out of South India. Fund III follows the solid performance of the earlier two similar funds that raised over INR 840 crores and built a diversified Assets book of ~18 investments to date that are generating between 18-20% gross IRRs. The earlier funds have generated these returns and preserved investors’ capital over some of the most adverse credit events that have impacted the industry in general and particularly the real estate sector to date starting with de-monetisation, the introduction of RERA, GST, the NBFC crisis, and the impact of Covid 19 over the last 18 months. Fund I has fully returned capital to its investors a year ahead of its maturity and Fund II is close to fully building out the portfolio in this quarter.
Buoyed by this traction, Fund III has done successfully raised INR 200 crores within months of its launch and is looking to capitalise on the strong momentum created in its target markets and the sustainable opportunity that this strategy presents. Built on intensive research, and guided by a seasoned investment committee, the fund will seek to use its focused and robust credit policy to create risk-adjusted returns and periodically distribute cash to reduce risks and provide a current income model for its investors.
According to Karthik Athreya, Head of Strategy, Alternate Credit, "The Funds have significant risk mitigation strategies that are differentiated in the market in terms of underwriting methods and diligence focus. Our investors have recognized after much diligence, that we have designed an effective credit template to address typical real estate risks and have successfully managed to monetize these for high yields. We have participation in our funds from HNIs, family offices, insurance companies and large treasuries that seek consistent income and an alpha to other corporate credit / bond fund type fixed income returns, especially in a declining interest rate environment."
"The real estate space is exhibiting growth – sales numbers reaching pre-covid levels, prices remain in line in our key markets and supply being managed. This growth is aided by the low interest rates offered by banks, attractive pricing, and incentives offered by developers. Like our existing funds, the underwriting criteria for Sundaram’s High Yield Secured Real Estate Fund III is expected to remain robust, which will enable the Fund to ably navigate the real estate investment space despite all the travails the sector has faced in the recent years. Even through the COVID pandemic, our existing portfolios have continued to generate cash while the entire industry was on a moratorium. We continue to remain optimistic on the sector.", says Vijayendiran R, CEO of Sundaram Alternates.
Harsha Viji, Executive Vice Chairman, Sundaram Finance added, “Our focus across various investment strategies going forward is to also transition our portfolio into ESG compliance over the next few years, reflecting the strong vision of Sundaram Group as a responsible corporate citizen.”
Fund III aims to raise INR 750 crores and is open for subscription to domestic and international investors. The fund is expected to do a final close in Q2 of 2022.
About Sundaram Alternates
Sundaram Alternate Assets Ltd. (SA), an emerging player in the AIF space, is a 100% subsidiary of Sundaram Asset Management Company Limited (SAMC). Sundaram Alternates caters to investment needs of high net-worth individuals (HNIs) with offerings across PMS and AIF products. SAMC is a wholly-owned subsidiary of Sundaram Finance Limited, a leading non-banking finance company in India.
The fund management team at Sundaram Alternates has over three decades of experience in creating wealth for investors across Assets classes and investment strategies. Our strategies are built on new-age industry practices, sound operating models, data-backed research, and transparency - to give your wealth the edge it needs.
Disclaimer
There is no assurance or guarantee that the objective of the investments will be achieved. Please read the fund documents carefully before investing. For more information, please write to aifops@sundaramalternates.com.
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