GERMANY – iii-investments has finalised the first closing of its second real estate debt fund but is planning a step-by-step increase to €250m.

The fund closed at €100m with a further incremental increase planned, while the first debt purchases are to take place "soon".

It will invest in loans secured on real estate located primarily in Germany but also in other countries within the European Union, "primarily in low-risk debts".

However, some mid-risk debts might be added to improve returns.

The company said the debt fund pool would act "indirectly as lender and participate in bank loans lent to an investor".

Chief executive Reinhard Mattern said: "The launch of a second debt fund within just six months provides evidence of the large demand for this new type of product.

"Simultaneously, we are increasing our lead on the rest of the field in this young area of business."

The real estate company said real estate debt funds, as an alternative to direct investments, were "additionally interesting" when seen from a regulatory point of view, as they allowed a "more effective use of equity".

It added that Solvency II made real estate financing "relatively more attractive to insurance companies compared with direct investments in real estate".

Real Estate competitor Deutsche Hypo recently announced plans to set up a credit fund of its own.