Walton Street BlackSoil Real Estate Debt Fund II on Thursday said it has made a first close of ₹360 crore and will offer debt financing to largely mid-income, residential projects in the top six cities.
The fund has a target corpus of ₹500 crore, with a greenshoe option of ₹250 crore. Domestic high net-worth individuals (HNIs) and family offices have invested in the fund, which will be fully raised by December. The debt fund is registered with the Securities and Exchange Board of India (Sebi) as a Category II Alternative Investment Fund (AIF).
The Walton Street BlackSoil fund is being raised at a time when construction financing has become a big challenge for developers.
The first fund, Walton Street BlackSoil Real Estate Debt Fund I, was launched in 2018 with a ₹320 crore corpus. It was fully deployed earlier this year and made 10 investments in Bengaluru, Hyderabad and Mumbai, more than 50% of which has been returned, the company said.
“The demand for debt is high given that there is a vacuum for capital for real estate development with banks and NBFCs doing limited lending to projects. Our second fund has a similar strategy as our first and we will do a combination of last mile and inventory funding. From our perspective, we want to take a de-risk position in our transactions rather than a higher yield,” Kaushik Desai, managing partner, Walton Street India Real Estate Advisors Pvt. Ltd said in an interview.
The second fund being bigger will do more transactions and comparatively large deal sizes than the first.
“…The focus of our second fund is to provide financing to developers with proven track records of execution across the mid-income housing sector in our key markets driven by end-user demand, to invest in key in-fill projects with full control over cash flow and visibility on financial closure and completion. We have received a tremendous response from the prior investors in WSBREDF-I for our second fund,” Desai said.
Given that banks are wary to lend, a number of real estate funds are stepping in to fill in the gap, though at a higher cost of lending.
The affordable and mid-income residential segment accounted for more than half of the new launches in the April-June 2021, the firm said.
“With reduced availability of the capital for residential real estate development, the funds generated from the second fund or WSBREDF-II will be deployed to provide financial assistance to developers to ensure consistent cash flow and timely completion of projects,” it said.
Recently, BlackSoil and the former India-based management team of U.S real estate investment advisor Walton Street Capital, LLC acquired Walton Street India’s real estate debt business.
As a result of the buyout, WSBREDF-II is no longer affiliated with or advised by affiliates of Walton Street Capital, LLC.
Since 2013, and prior to the launch of the second fund, Walton Street Capital India and BlackSoil have jointly placed more than ₹1,500 crore of debt capital across 50 real estate transactions.
This article was first published on livemint.com