APG and Pramerica Real Estate Investors are shifting the focus of their European real estate debt strategy to the Netherlands.
PRECap V Netherlands, the latest in a series of debt funds backed by APG and managed by Pramerica, will build up a portfolio of junior debt and preferred equity investments in the country, with a partial allocation to neighbouring Belgium.
US-headquartered fund manager Pramerica has raised €265m of discretionary capital, the majority of which has been provided by Dutch pension manager APG.
APG has been a cornerstone investor in previous PRECap vehicles. The most recent, PRECap IV, raised €820m from global investors, including APG, for a pan-European strategy.
Robert-Jan Foortse, head of European property investments at APG, said: “The Dutch real estate market is suffering from a funding gap, where the finance market remains tight and dislocated.
“Currently, there is the opportunity to provide junior debt and to capitalise on both acquisitions and refinancing opportunities. We consider this the right moment to allocate capital to the Dutch real estate market through this exclusive debt mandate with Pramerica.”
According Andrew Radkiewicz, managing director and co-head of Europe at Pramerica, the Netherlands is at an attractive point in the cycle, with less competition in the lending market, compared to other countries.
“We believe there is an exciting opportunity in the Dutch market, with a large number of loans and commercial mortgage-backed securities expiring in the short to medium term, and a significant shortfall in existing debt availability.”
Radkiewicz continued: “Any deals we do, will be predicated on the quality of the underlying asset secured on the loan. But we believe that here is potential to generate excellent risk-adjusted returns.
Harmen Geers, spokesman for APG, said: “Many owners of prime commercial property, who have often financed their real estate before the financial crisis against loan-to-value ratios of 60 or 70%, need to refinance soon.
“However, as banks now have limited their offer to perhaps 40%, our new fund is aimed at financing the funding gap. By providing junior debt, we run less risk than the providers of the equity part of the entire financing.”
He stressed that the underlying property is such high quality, that its meets the acquisition criteria of APG, but explained that the owners were holding on to the objects, as they wanted to profit from the expected rise in value.
APG manages €345bn in pension fund assets and is the asset manager and pensions provider for the €300bn civil service pension fund ABP.
Pramerica Real Estate is the European arm of the real estate investment and advisory business of US-based Prudential Financial, and has a global real estate debt platform of more than €3.6bn.