- What Alder Financial Group is raising capital for an alternative commercial mortgage fund
- Why It is looking to fill a gap in commercial real estate lending
- What next The fund is targeting a minimum annual distribution of 9% on an unlevered basis
Alder Financial Group is looking to raise $100m for an alternative commercial mortgage fund, Green Street News can reveal.
The closed-end fund, Alder Alternative Commercial Mortgage Fund, plans to write 35 first and second mortgages on transitional industrial, residential and retail properties in Canada’s largest cities, including Toronto, Vancouver, Ottawa, Calgary and Edmonton.
Alder Financial is a new entity created by Franc & Co., a commercial real estate brokerage and debt advisory firm, with other partners. The sponsors are raising capital from accredited and institutional investors.
The fund has a target minimum annual distribution of 9% on an unlevered basis. It will have a three-year investment period, followed by a yearlong wind-down phase. The partners will consider forming a perpetual open-end fund afterward.
The sponsors are pitching the fund as an opportunity for alternative lenders to meet the growing demand for refinancing. They see a gap in the market as traditional lenders, institutions and other nonbank lenders have pulled back from the market.
They also note that high interest rates have negatively impacted the debt-service coverage of loans maturing in the near term, leading to growing demand for alternative financing and sources of capital.
First mortgages are expected to account for at least 65% of the fund’s holdings, with second mortgages accounting for up to 35%. The fund aims to write bridge loans on transitional income-producing properties as well as land and construction takeout loans. Residential builder asset inventory also could be considered for second mortgages.
Management will co-invest $2m in cash into the fund, which will be deployed alongside limited partners.
