M&G invests record €2.9b in mortgage loans in 2015

M&G Investments has deployed £2.2 bn (€2.9 bn) in European commercial mortgage loans in 2015, bringing its total investments in real estate debt since 2010 to £5.5 bn.

The 2015 investments are spread across 24 separate loans, covering all sectors, including the first development loan undertaken by M&G’s real estate finance team. In addition to deploying capital, an additional £750 mln was raised from external institutional investors and pension funds during 2015 for investment in senior commercial mortgage loans.

'This has been our most active year in the market post the global financial crisis as there continues to be increasing demand for alternative methods of funding real estate in the UK and continental Europe,' said John Barakat, head of real estate finance, M&G Investments. 'Institutional investors’ search for yield and security has ensured that real estate debt remains in the spotlight and these investments continue to offer among the most attractive relative value opportunities in fixed income.'

He added 'For borrowers, M&G’s ability to provide whole loan financing solutions and our normal intention to hold the entire loan to maturity, are factors that differentiate us from many of our competitors. Given the current market dynamics and investor demand, we foresee further capital raising across junior and senior real estate debt strategies this year.'

M&G both originates and participates in deals across nearly all sectors of commercial real estate. Last year its financing deals included a €35 mln senior loan secured against a portfolio of over 500 family homes in the Netherlands; a €128 mln junior loan for the acquisition of a portfolio of office and logistics assets in the UK, France, the Netherlands and Germany; a €75 mln junior loan secured against a portfolio of hotels in Germany, France, the Netherlands and Belgium and a £175 mln senior and junior loans secured against a portfolio of over 150 UK light industrial estates, predominately in London and the South East of England.

M&G began its initial real estate debt fund in 2009. In March 2014, M&G completed the fundraising for two new junior commercial mortgage funds, reaching £1.35 bn of capital commitments from over 40 institutional investors from Europe and the US.

M&G’s total commitments for senior commercial mortgages has now surpassed £4.5 bn and the company expects additional mandates in the first quarter of 2016.