Pramerica mulls new debt fund

Pramerica Real Estate Investors is mulling a follow-on debt fund after closing its third debt vehicle at end-April, according to Andrew Radkiewicz, one of the fund’s two managers.

‘As we evolve, it is likely in the reasonably near future that we could roll out our broader debt strategy for global investors, which could potentially have a similar target size to our first debt fund, which is now €500 mln,’ he added.

Pramerica Real Estate Capital III closed at the end of April, following commitments of €260 mln which can be increased by a further €260 mln once the first tranche has been invested, likely within the next year, Radkiewicz said. It will focus on directly originated junior debt, he added: ‘We target junior debt positions ranging between 30% and 75% of the capital stack. However, because we invest ungeared equity, the underlying real estate quality is the key driver, not just LTVs,’ he added. The fund will not invest in any secondary debt.

UK and Germany
The vehicle will focus on office and retail properties in the UK and Germany, Radkiewicz said. ‘We would be happy to target up to a 50-50 split, as these are the largest and most liquid real estate markets in Europe. For offices, we look for strong fundamentals in key business districts, focusing on the main cities such as London, Manchester and Birmingham in the UK and the ''Big 6'' in Germany. Retail, however, is different as the location is much more important - we would only lend on retail assets in dominant locations with good demographics,’ he added. PreCap III has a target annual return of between 8% and 10%, which is predominantly income-driven. ‘Typically, we would underwrite loans of between €5 mln and €100 mln, although we certainly have the capacity to go higher than €100 mln, without the need to club the deal,’ Radkiewicz said.

Click on the link below for the full interview with Andrew Radkiewicz