UBS mulls launch of European debt fund

UBS Global Asset Management is considering the launch of a senior debt fund for continental Europe, according to Anthony Shayle, head of global real estate and UK debt at UBS.

‘We are looking at ways to build out the platform that has been established in London through UBS Participating Real Estate Mortgage Fund (PREMF) I. The options include a more traditional-style senior debt fund for Europe,’ Shayle told PropertyEU.

UBS launched PREMF a year ago, raising £141 mln from three investors including Japan’s Mitsubishi Corporation and an unnamed European pension fund. The group expects to complete the second close for the vehicle within the next few days, having received £25 mln in equity commitments from two new investors.

UBS is looking to grow the size of the UK-focused fund to £300 mln by the end of the marketing period in June, Shayle noted. ‘We are hopeful that further capital may in due course follow to help the fund reach its target.’

UBS-PREMF provides senior loans with a loan-to-value of up to 80% and a maturity of between five and seven years, offering investors a net return of between 8 and 10%.

‘We are not more expensive than a combination of traditional debt and mezzanine but we offer a one-stop solution, one single tranche of debt with no set-up costs and no complications in putting deals together,’ Shayle told PropertyEU at the fund launch last year.

Commenting on the follow-on vehicle, Shayle said that UBS-PREMF II would have a more traditional approach, offering loans with a conservative loan-to-value. The fund, which is likely to at least match its predecessor in terms of size, is expected to be launched early next year, he added.

‘The timing is yet to be determined but could be imagined as having capital to lend by the time the investment period in PREMF I has concluded and that could indicatively mean around June 2016,’ Shayle concluded.

PREMF II would be the latest debt fund to launch in Europe. Last week, Deutsche Asset & Wealth Management (DeAWM) said it raised €500 mln in equity for a commercial real estate senior loan fund.

Structured as a Spezialfonds (institutional fund), the vehicle will invest in German senior commercial real estate loans with LTV ratios of up to 60% and secured against office, retail, residential and logistics assets. Loan maturity will range from three to 10 years.

Similarly, US alternative investment manager Ares Management said earlier in January that it is mulling the launch of a European real estate debt fund. While Ares has the capability to invest in the European lending space via its US REIT, Ares Commercial Real Estate Corporation (ACRE), it doesn’t have a dedicated European real estate platform – yet.

The group plans to establish a European real estate lending unit in London which will lend on assets in both the UK and continental Europe.