Prudential raises $805m for US debt fund

The New Jersey-based real estate investment manager has wrapped up capital raising for its US debt fund, which attracted commitments from institutional investors such as the Employees Retirement System of Texas.

Prudential Real Estate Investors (PREI)
, the real estate investment management arm of Prudential Financial, has held a final close for its Prudential US Real Estate Debt Fund, amassing $805 million of discretionary capital from pension plans, sovereign wealth funds and other institutional investors from the US, Asia and the Middle East.

An early investor was the Employees Retirement System of Texas, which committed $125 million to the fund in July 2011. Limited partners also have the option of making co-investments alongside the fund.

The investment manager held a first close for the fund on $224.4 million in equity in July 2011 and had captured a total of $474.7 million as of August, according to filings with the US Securities and Exchange Commission.

PREI will provide mezzanine finance, debt-like preferred equity and first mortgages in areas where financing is not being made available by banks and other senior commercial mortgage lenders. “In the US, we expect significant demand for creative debt financing as approximately $1.8 trillion in mortgage loans come due over the next several years, leading property owners to search for reliable and trusted sources of capital,” said Jack Taylor, head of PREI’s global real estate finance group and portfolio manager for the US debt platform, in a statement.

In addition to providing fresh capital for new originations, the fund will make secondary market purchases of performing, subperforming and nonperforming loans. “We will target debt investments secured by institutional-quality, income-producing properties throughout the US, owned by experienced real estate investors,” added managing director Steve Plust, who oversees PREI’s US debt business along with Taylor and Steve Alpart. Typical investments will range in size from $10 million to $65 million.

Prudential US Real Estate Debt Fund is the second debt fund that PREI has raised, following a UK-focused vehicle, Pramerica Real Estate Capital I, which closed on $800 million in commitments last year. PREI now has raised more than $1.6 billion in equity for its global debt platform.