Patron Capital has closed its sixth-generation fund on €844m.
Launched in the first quarter of 2019, the fund held a first close in May 2019 towards its initial target of €800m. Keith Breslauer, Patron's managing director, said: "The carry and hurdle rates are in line with other similar vehicles with a value-add and opportunistic strategy."
Of the fundraising process, Breslauer said: "The fundraising process involved in excess of 400 meetings including multiple phone calls. We found that investors greatly appreciated our level of transparency, candour and attention, particularly when Covid-19 hit."
With regard to fundraising during the coronavirus crisis, he said: "We encountered two general consequences: some investors, mainly smaller ones, could not make any commitments without doing site visits and manager visits, and would not make new commitments, or if they did, would only commit with managers they had existing relationships with. Other groups, usually larger ones, saw the opportunity to capitalise on the Covid-19-related disruption, and specifically reached out to us to start work. Some larger commitments came in particularly during this period, including an existing investor of ours, a US state pension fund, and a new relationship, a major sovereign wealth fund."
The fundraise includes approximately €128m in co-investment capital.
Patron Capital V, the fund's predecessor, closed on €949m in July 2016.
The fund is a closed-ended Jersey-based Limited Partnership, while the firm itself is headquartered in London.
Evercore acted as placement agent.
Of the capital raised, 83% came from Patron's existing investor base and relationships with investors such as pension funds, sovereign wealth funds, endowments, foundations and asset managers. Around 53% of the capital came from investors based in North America, followed by LPs from the Asia-Pacific region (20%), Europe (15%), and the Middle East (12%).
The fund has more than 20 LPs, including several consultant and advisory firms that represent more than 30 LPs.
LPs in the fund's predecessor include the Kentucky Retirement System, with a commitment of €50m, and the University of Michigan, with a commitment of €30m. The University of Michigan is an LP in Patron Capital VI also.
The fund had a minimum commitment size of €5m, though Breslauer said that where consultants were involved, the individual investors they represent may have committed less.
He said: "The GP commitment is initially 1% and can be increased to 5% during the investment period. We anticipate that it will be 2-3%. Perhaps unusually, our GP commitment comes entirely from the personal commitment of the wider Patron team."
Patron VI will continue the same investment strategy as the firm's previous funds, opportunistically targeting from 10 to more than 15 distressed investments, directly or indirectly related to property, across western Europe. The fund will invest in individual properties across a range of sectors, as well as in property-backed corporate investments and credit opportunities. The typical equity cheque of the fund will be €30-90m. Breslauer said: "Many investments will consist of thematic programmes comprising multiple assets, and we expect two or three large investments given the co-investment interest we received."
The fund's expected holding period is around three to five years for each portfolio company, with an investment period of four years. Breslauer said: "In this uncertain environment, we have a definite bias for keeping holding periods short especially for assets that we can turnaround quickly."
The fund has completed seven investments and is in the final stages of closing on several others, using approximately 25% of the fund's investment capacity, according to a statement.
Breslauer said: "Since the start of the Covid-19 pandemic, we have been pursing numerous opportunities and we have acquisitions in the pipeline that we expect to close before the end of Q1."
Patron Capital – Keith Breslauer (managing director).
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