PGIM holds first close for US debt fund – Exclusive

The Madison, New Jersey-based investment manager launched the open-ended real estate vehicle earlier this year. 

PGIM Real Estate has collected $300 million in the initial close for its new US real estate debt fund, PGIM Real Estate US Debt, PERE has learned.

The Madison, New Jersey-based investment manager launched the open-ended vehicle at the beginning of the year and has gathered the capital from five investors, according to sources familiar with the matter.

PGIM declined to comment, but PERE understands that through the fund, the firm will originate first mortgages for diversified real estate properties in the US. PGIM Real Estate US Debt is understood to be targeting a net internal rate of return of 7 percent.

PGIM Real Estate US Debt is one of several open-ended real estate debt vehicles that have been launched over the past few years, including Mesa West’s Mesa West Core Lending Fund and MetLife Real Estate Investors’ MetLife Commercial Mortgage Income Fund. The San Diego City Employees Retirement System committed $50 million to each fund last month.

Other open-ended real estate debt funds include Heitman’s Heitman Core Real Estate Debt Income Trust, H/2 Capital Partners’ H/2 Special Opportunities Fund III and IV, Cairn Capital’s Cairn European Commercial Mortgage Fund, according to PERE data. Also, London-based investment manager TH Real Estate is readying its first US real estate debt fund, with plans to launch the open-ended vehicle this quarter, PERE previously reported.

Sponsors of open-ended real estate debt funds typically have touted the greater liquidity of such vehicles relative to their closed-ended counterparts. With open-ended funds, capital is regularly coming back into the fund from maturing loans, allowing limited partners to make redemption requests and exit their investments on a quarterly basis over time.

In April, PGIM closed on more than £1 billion (£1.29 billion; €1.18 billion) for Pramerica Real Estate Capital VI, its largest-ever private real estate debt vehicle in Europe. The fund will provide debt across the capital stack, including whole loans, mezzanine and preferred equity, targeting predictable income returns combined with capital upside through profit participation. Investments will range in size from about £10 million to over £100 million and will include properties in need of development financing or repositioning.

Separately, PGIM hired Jacqueline Brady as an executive director in PGIM Real Estate’s Americas business development team. Based in New York, she will focus on managing client relationships and fundraising efforts, reporting to Dennis Martin, head of Americas business development. She previously was managing director of institutional sales at CenterSquare Investment Management, where she was responsible for developing the firm’s relationships with institutional clients and consultants and expanding the firm’s presence into new markets.

PGIM Real Estate, the real estate investment business of Prudential Financial, managed $65.9 billion of gross assets and $47.6 billion of net assets globally as of March 31. Its investment strategies include real estate equity, real estate private debt, real estate securities and defined contribution.