GERMANY – The first real estate debt fund structured as a Spezialfonds has been established on behalf of a German pension fund, according to iii-investments.

The German real estate fund manager has been awarded a mandate to establish a €200m debt vehicle for the unnamed institution and hopes to launch another fund for other investors.

According to iii-investments, it will mark the first instance of an immobilien KAG launching a debt Spezialfonds.

Reinhard Mattern, CEO of iii-investments, said: "This commission enables us to issue the first special debt fund by a real estate capital investment company in compliance with the German Investment Act.

"The high demand shows that, with this new type of product, it was right to rely on the vehicle of a German special fund familiar to our German customers."

He added: "We are also optimistic that in the near future we will be able to conclude the first closing of a second debt fund in the form of a pool fund."

According to iii-investments, the fund will act "indirectly as lender" and participate in "bank loans" secured against real estate primarily in Germany but also in other euro-zone markets.

It will target loans between €20m and €40m in size and only those that are euro-denominated.

The fund will target "low-risk debt" for the most part, but iii-investments stated that it could incorporate "a few medium risks" to "optimise the return".

"As a real estate investment company, we possess the know-how not only to be able to analyse the make-up of the loans in detail on behalf of our customers but are also able to evaluate the properties that lie behind these loans in accordance with our criteria for investigating the purchase of real estate," Mattern said.

"Basically, we only purchase such loans on behalf of our customers as we would ourselves invest in the property."

The fund manager also released a report concluding that the funding gap produced by the retrenchment of traditional bank lenders would provide opportunities for equity-rich investors. It also suggested that new debt funds would fail to fill the whole funding gap.

Banks throughout Europe are avoiding lending against non-core assets and providing debt with a loan-to-value ratio of more than 50%. "A lot of equity is needed for these deals," the report said.

Mattern added: "Whoever does not rely on debt capital can get attractive returns in the current environment both as a buyer as well as a lender."

The real estate company also published an updated version of its 'Market Thermometer', identifying Hamburg, Berlin, Stuttgart, Marseille, Lyon and Vienna as the most attractive city investment markets in Europe

Cities from Southern European countries remain at the bottom of the list, but also most areas in London as well as Paris have fallen into the 'moderate' catetgory.

The analysts said prices in Southern European cities have "not fallen enough to adequately reflect the economic situation in these countries."