EUROPE - LaSalle Investment Management has raised institutional capital for a new real estate debt strategy as a number of fund managers position themselves to capitalise on widespread deleveraging of banks.

Institutional investors have committed £100m (€119m) in the first closing of LaSalle's UK Special Situations fund, which will target mezzanine, preferred equity and debt opportunities by working with banks and borrowers.

The capital raise follows the successful launch of a European debt fund by Pramerica, backed in part by APG, in June.

A number of other fund managers are setting themselves up to capitalise on an expected rise in real estate 'workouts' by lenders across Europe.

Valad has been in talks with lenders with a view to injecting capital and providing mezzanine financing for distressed portfolios.

The fund manager has already taken over the investment management of two large cross-border European portfolios, but plans to raise third-party equity and mezzanine debt as part of similar deals in the future.

Internos Real Estate has identified a 12 to 24-month window of opportunity for investors as banks seek to 'unbundle' their European real estate portfolios.

Jos Short, executive chairman at Internos, said the days of "extend, amend and pretend", where banks continually roll over financing so as not to realise losses, were numbered.

He said: "The upturning economies of northern Europe will see more of the unbundling action in early 2011, which is likely to create a 12-month opportunity for investors.

"Initially, this opportunity will express itself as seldom-seen rental yields, leading to excellent growth in capital values, but this will probably not be until 2013.

"Overleveraged and quoted small and mid-cap real estate businesses form a signal opportunity for the opportunistic investor or fund manager."

LaSalle is looking to raise further capital for its special situations strategy on the basis there is an emerging shift among banks to reduce exposure to legacy loans and by borrowers looking to raise mezzanine finance.

The investment manager argues investors can fill the resulting 'debt gap' by recapitalising assets, acquiring debt or originating mezzanine loans.

Amy Aznar, head of special situations at LaSalle, said: "While much of the property boom was built on leverage, real estate fundamentals have come firmly back into focus.

"Increasingly, investors are recognising there is a real opportunity for property specialists to fill the debt gap as more borrowers look for new sources of capital.

"We are continuing to raise funds ahead of a second closing on our Special Situations Fund and expect to see many more investment opportunities over the coming months."