INTERVIEW: Pramerica launches new European debt fund

Pramerica Real Estate is rolling out a third European debt vehicle focussing on core junior debt in the UK and Germany

At a time when many funds are still struggling to attract investors, Pramerica Real Estate seems to be on an investment roll. In October, it raised $805 mln (€620 mln) for its US Real Estate Debt fund, which will provide fresh capital for new originations as well as make secondary market purchases of performing, sub-performing and nonperforming loans.

And, hot on the heels of its US fund, Pramerica Real Estate Investors has just started fund raising for a new European debt fund. Here, Jack Taylor, head of Pramerica Real Estate Investors global real estate finance group, based in New Jersey, and Andrew Radkiewicz, managing director of Pramerica Real Estate investors in Europe, based in London, tell PropertyEU why debt funds are the way to go and why Germany and the UK are the markets to watch in Europe. PropertyEU: You have just raised $805 mln from institutional investors for your US debt fund. What will you invest in? Taylor: We’re targeting the top 25 Metropolitan Statistical Areas (MSAs) in the US, which includes cities such as New York, Washington DC, and Los Angeles but also non-coastal cities. Our mandate is to invest in income-producing properties that are of institutional quality. This includes the usual ‘food groups’ of offices, retail, hospitality, logistics and multi-family but we’re very flexible and could also invest in other asset classes. Our target returns are in the low double digits. PropertyEU: Do you plan to launch any new European funds soon? Radkiewicz: Yes. We’re aiming to close shortly on a new fund, targeting core junior debt with a target return of 8% to 10%. It will be a low-risk fund focusing on the UK and Germany. We have also launched a follow-on £500 mln mezzanine fund, targeting lowto-mid-teen returns, which continues the investment theme of our first strategy. PropertyEU: Last year, you raised $800 mln for your UK and German mezzanine debt fund, Pramerica Real Estate Capital 1 Fund. How much of this capital has been invested so far and what sort of real estate assets have you lent on? Radkiewicz: We expect our Pramerica Real Estate Capital 1 fund to be fully invested by the year-end. Around 70% is likely to be invested in the UK, with the remaining 30% in Germany. In terms of the underlying real estate, we’re firmly targeting good real estate fundamentals, so we’re providing capital to fund predominantly traditional core and core-plus assets, in the office, retail, warehouse and multi-family sectors. In terms of jurisdiction, we’ve completed deals in London and other UK cities, as well as transactions in Cologne and Frankfurt.

Click on the link below for the full interview