The highly attractive returns offered by the early mezz debt funds in Europe may be a thing of the past, but development finance is still an interesting alternative, according to Robert-Jan Foortse, head of European Property Investments at the asset management arm of Dutch pension fund giant APG.
Speaking during a panel session hosted by INREV at the latest edition of MIPIM last month, Foortse said APG committed €1 bn to mezz debt funds between 2010-13. ‘We were spoiled by the returns we were getting for mezz funds of that vintage. The banks are back now and debt funds no longer offer an attractive risk-return versus equity.’
One niche in the debt financing space where attractive returns of 17-18% are still possible is in development, Foortse said. ‘It might make sense to commit some money to that strategy.’
APG was one of the pioneers among Europe’s institutional investors to endorse European real estate debt vehicles in the post-crisis period and freed up capital for the strategy from its real estate allocation.
Debt funds have tailed off in attractiveness in recent years, agreed Ian Gleeson, chief investment officer - Global Multi Manager, CBRE Global Investment Partners Continental Europe. 'There's more competition in the lending market and it has become more difficult to find opportunities to deploy capital. But the income component remains attractive. And people still want income.'
