Prudential Real Estate Investors’ European arm has closed its latest debt fund with €820 million of capital commitments, underlining itself as one of the largest private equity real estate debt platforms in the region.
Pramerica Real Estate Investors said the discretionary capital for Pramerica Real Estate Capital (PRECap) IV had come from institutional investors in North America, Europe and the Middle East. Dutch pension fund asset manager APG has committed further capital to the vehicle, having also participated in earlier funds in the series, the firm revealed.
The close of PRECap IV follows an announcement in April that Pramerica had amassed around €520 million for PRECap III, its predecessor. This latest fundraising means the firm has amassed a total of €2 billion of equity from institutional investors for debt investments in Europe since the launch of its first fund in 2010. Pramerica has completed 30 investments, comprising more than €1 billion secured by European real estate valued at more than €4 billion, predominantly located in the UK and Germany.
PRECap IV, like the predecessor funds, has a value-added strategy and investors could receive returns between 13 percent and 17 percent. The company explained it received “high demand” from limited partners for its latest vehicle, adding: “There remains a significant opportunity for providers of junior debt for the acquisition or refinancing of assets with good underlying property fundamentals, but for which traditional senior and other lenders are unable or unwilling to provide full financing.” The fund is focused on office, retail, industrial and residential properties in the UK and Germany with deals ranging in size from €10 million to more than €100 million.
Andrew Radkiewicz, co-head of Europe at Pramerica, said in a statement: “The success of the latest equity raising for our European debt platform shows the level of investor interest due to strong risk adjusted returns and the attractiveness of this flexible capital to owners of real estate.”
The fundraise is the second in Europe to be announced by a major insurer inside a week. Just yesterday the British insurance company Aviva said its asset management arm, Aviva Investors, had held a first close on £187.5 million (€223 million; $300 million) for its senior lending UK Commercial Real Estate Senior Debt Fund. Five investors committed to the close, including four UK Defined Benefit schemes. It now has £287.5 million of equity, and the company said it was on track to meet its £500 million target by final close in January 2015.
The fund was launched in July 2013 targeted a yield of between 2.5 percent and 3.5 percent above equivalent maturity UK government bonds and invests in fixed-rate first-ranking mortgages advanced at up to 65 percent loan to value, with five to 10 year maturities. The loans are secured against core and core plus UK commercial real estate “owned and managed by proven high quality borrowers”.
James Tarry, fund manager, Real Estate Debt, said: “The interest we have seen from institutional investors in the risk and return profile of senior secured debt validates our view that the opportunity in this space is highly compelling, and we believe that it will remain so for the foreseeable future.” He said the fund had already deployed more than 50 percent of equity at the first close capital in two deals.