Sundaram Alternate launches third real estate focused fund

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Sundaram Alternate Assets, a subsidiary of Sundaram Asset Management Company 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 high yielding debentures and mezzanine securities of Indian entities backed by real assets that may include real estate, logistics, hotels and healthcare facilities. 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 rate of return) on a gross basis. The fund will invest predominantly in south India with opportunistic investments in Maharashtra and NCR, a press release issued by the company said.

“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 for 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 2 crore 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, MD of Sundaram Asset Management Company.

The fund’s target size is Rs 750 crore (plus a greenshoe of Rs 250 crore). The minimum investment in this fund is Rs 1 crore. Karthik Athreya is the head of the strategy (alternative credit) and the fund will be managed by Kumaran Chandrasekaran. The fund is open for subscription to domestic and international sophisticated investors. The sponsor of the fund is Sundaram Finance.

Sundaram Alternate currently manages two real estate funds. With a gross portfolio IRR (internal rate of return) of around 19%, Sundaram Alternate’s High-Yield Secured Debt Fund I has repaid approximately 61% of capital in less than 3 years since final closing, a press release issued by the company said.

The fund has been distributing interest income quarterly to investors and has continued to do so despite the challenging covid-19 environment, it added. The second real estate fund, 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 more than one year, the release added.