Cardinal plans second €300m property finance fund

Investment firm has committed almost all of a previous pot a year ahead of schedule

Front row, from left: Nick Corcoran of Cardinal Capital, Wilbur Ross of Wilbur Ross and Co and Nigel McDermott of Cardinal Capital. Back, from left: Jim Burr of the Carlyle Group and Jim Lockhart  of Wilbur Ross and Co. Photograph: Bryan O’Brien

Front row, from left: Nick Corcoran of Cardinal Capital, Wilbur Ross of Wilbur Ross and Co and Nigel McDermott of Cardinal Capital. Back, from left: Jim Burr of the Carlyle Group and Jim Lockhart of Wilbur Ross and Co. Photograph: Bryan O’Brien

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Cardinal Capital Group is planning a second €300 million property development fund, after committing almost all of a previous pot a year ahead of schedule in a recovering market, according to market sources.

The investment firm is led by financiers Nick Corcoran and Nigel McDermott.

The original fund, which closed in 2015, provided subordinated property debt financing – called mezzanine funding – to a number of developers in recent years seeking to refinance debt owed to Nama, banks and private equity firms. It has also extended risk capital to companies working on development projects and investments.

The last fund, called the WLR Cardinal Mezzanine Fund, was backed by Wall Street investor Wilbur Ross, whose firm WL Ross made a €500 million profit from a rescue investment in Bank of Ireland in 2011, and who went on to become US commerce secretary last year. However, potential investors in the new fund have been told WL Ross will not be involved this time round.

Maximising returns

“We’re still very focused on maximising the returns to investors on our first mezzanine fund,” Mr Corcoran said in response to a query from The Irish Times. “However, given the extremely strong deal pipeline and the attractive return potential in the market, it would be reasonable to assume we will continue to deploy capital via a follow-on fund.”

Mezzanine debt for property deals in Ireland typically carries an interest rate of between 12 per cent and 15 per cent, as it ranks below senior lending facilities in the event of the borrower running into trouble.

The WLR Cardinal Mezzanine Fund reportedly provided joined forces with Bank of Ireland to refinance about €100 million of debt Galway-based O’Malley Homes and Development owed to US private equity group Cerberus. Cerberus had acquired the loans from Nama.

Refinanced

It also emerged in January WLR Cardinal extended junior debt to the Gleneagle Group – owner of the Gleneagle Hotel and INEC entertainment venue in Killarney – as its facilities from AIB were refinanced by Ulster Bank.

Meanwhile, late last year, Harcourt Developments, the property group headed by Donegal businessman Pat Doherty, refinanced most of its €300 million of loans from US investment firm Apollo with WLR Cardinal and Bank of Ireland. Apollo had bought the loans from Nama in 2016.

The typical loan size of the current fund is between €5 million and €50 million per single transaction. It is understood that about 90 per cent of the original fund has been committed, backing 1.5 million sq feet of office projects, 1 million sq ft of retail space, developers working on 4,200 residential units and the refinancing of a number of hotel groups.

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