EUROPE - Asset manager Duet Group is raising additional capital for its listed European real estate mezzanine debt fund, seeing a large pipeline of opportunities in Europe for investments in debt backed by commercial properties.

Duet Real Estate Finance - the listed company managing the fund - reached a second closing in March this year at £275m (€313m) and is now seeking to raise more than £25m through a placing of shares.

The company is hoping to reach a final closing in August at £300m.

Dale Lattanzio, managing director at Duet Private Equity, told IPE: "The fund is 33% invested, and we are currently looking at investing in, or making loans that are backed by, assets that are stabilised with in-place cash flow.

"We expect to see continuous opportunities to invest in debt that is required to refinance loans maturing this year and over the next three years."

Earlier this year, the fund provided debt financing for the office building in London's Canary Wharf, 17 Columbus Courtyard, alongside Partners Group.

Lattanzio said: "The London office market offers good prospects for return due to sustainable rental prices driven by high demand exceeding supply."

The Duet fund has provided mezzanine debt for seven transactions across Europe so far.

"Europe remains attractive for real estate debt funds, as banks, which were the predominant players in terms of debt financing, have shrunk their activities since the financial crisis, being forced to deleverage," Lattanzio said.

"The debt market for senior finance seems to be even more challenging now than it was at this time last year. This could be explained by concerns banks have expressed over new regulations coming into the market, such as Basel III, or over the spectrum of the sovereign debt crisis.

"As a result, Europe represents a new market for real estate debt funds as opposed to the US, where these vehicles were already well established before the turmoil with insurance companies and pension funds consistently allocating capital to them."

Duet is hoping to set up a similar-type vehicle in the coming months, once the European real estate debt fund is fully raised in August.

Topics