After six years of success, specialist manager Ameris Capital's sixth real estate debt fund has entered a new phase. Seeking to capitalise on market trends and expand its investor base, the Chilean investment boutique has decided to convert the fund into a semi-liquid fund.
The investment vehicle in question is called Ameris Deuda Inmobiliaria VI (known at the company as ADI 6), and will invest in loans to real estate developers who need capital to carry out their projects under different structures. As Martín Figueroa, a partner at the company, explained to Funds Society, these can include preferred shares, mezzanine capital, cash flow prepayments or other structures with solid guarantees.
“The fund's contributions were limited because the necessary market conditions were not in place to grow assets,” the executive explained. For this reason, the manager began reinvesting resources in new projects as previous ones matured. “Being a fund with a portfolio of 15 projects and investments with different maturity dates and regular cash flows, we were able to structure it in a way that would provide liquidity to investors,” he explained.
The key moment in the transformation of this investment product came at the end of May this year, when the manager convened the fund's investors through an extraordinary general meeting and voted to extend the strategy's horizon by four years and change regulations to ensure liquidity. Following shareholder approval, these changes came into effect on July 1.
What prompted this decision? “The products investors want are changing and as AGF we have to adapt to their demands. Currently, interest rates are high so the opportunity cost to investors is high. If we do not adapt, investors will prefer other options that offer slightly lower yields but provide liquidity,” he points out.
Ameris has been offering private debt investment options for over a decade, initially only to institutional and select individual investors, but now aims to broaden the investor base for these strategies.
strategy
The ADI 6 investment product aims to generate income by supporting the real estate industry, which has been particularly affected in recent years.
As Figueroa explains, the company's investment thesis is based on a situation in which the real estate market and related companies are in a state of stress, making it difficult to secure the capital needed to develop projects. “We want to help them continue to develop their businesses in exchange for solid guarantees,” the Ameris partner added.
The portfolio currently consists of 15 projects across different regions of Chile. “These are simple projects with good locations, so we think they will sell without any problems,” he explains.
The business comes as demand for private debt funds grows at a time when interest rates, and therefore yields on fixed deposits, are falling. “Private debt was in high demand a few years ago, but its popularity fell when deposit yields were at 1% per month, and now that that has normalized, it's becoming attractive again,” explains Figueroa.
In this context, private debt is an area Ameris Capital wants to continue to develop, not only because of its role in markets and country development, but also because “it is an asset that should be included in any investment portfolio, just like in developed countries,” the executive said.