Urban Partners’ green mezzanine fund achieves €136m first close
A new fund offering mezzanine finance to help European developments and existing buildings go green has reached a €136m (£117m) first close.
Urban Partners’ Velo Mezzanine Credit Fund is targeting 10% net IRR by investing in real estate across Northern Europe, including Germany and the Nordics.
VMC will provide green financing to drive sustainability across the capital structure, with “brown to green” projects prioritised as a key pillar of the investment strategy.
A new fund offering mezzanine finance to help European developments and existing buildings go green has reached a €136m (£117m) first close.
Urban Partners’ Velo Mezzanine Credit Fund is targeting 10% net IRR by investing in real estate across Northern Europe, including Germany and the Nordics.
VMC will provide green financing to drive sustainability across the capital structure, with “brown to green” projects prioritised as a key pillar of the investment strategy.
It plans to fill a gap left by restrictive bank lending conditions, which makes development and heavy retrofitting increasingly difficult.
Velo said the VMC would support safe and meaningful projects while maintaining attractive risk exposure levels.
The closed-ended fund is green finance specialist Velo Capital’s fourth advisory mandate. Velo, which has around €1bn of AUM in loans to real estate, is now looking to expand further out of its heartland in Germany. It is part of Urban Partners €20bn AUM platform, which also includes real estate investor Nrep, venture capital firm 2150, and private equity investor Luma Equity.
Urban Partners chief executive Claus Mathisen said: “In the current market, some banks are pulling back. They are leaving a financing gap that represents a significant opportunity for alternative lenders. Business opportunities are immense, and with this new fund, we want to demonstrate how alternative credit solutions can propel a green financing wave with the urban transition in focus.”
The fund has a target of raising €600m and is expected to close within the first half of 2024.
Mathisen added that the need for alternative green financing would only keep increasing. “Evidence is mounting that for the real estate sector to achieve net zero emissions, we need a massive capital allocation towards buildings and cities. The green transition needs to be three times faster than what we are doing today. The good news is that this opportunity is more compelling for alternative lenders than ever.”
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Image from Urban Partners
