EUROPE - M&G Investments has closed its Real Estate Debt fund with €343m ($491m) of institutional investor commitments.
The announcement marks the fund's third and final close, with assets committed by pension funds and other institutions across Europe and the US.
The fund, which seeks double digit, unlevered returns, over its seven year life, provides junior commercial mortgages against all types of property in Western Europe.
Seven investments have been made so far, including transactions in the UK, Germany and Spain, and two additional loans are expected to complete in July, the manager said. So far the portfolio has included loans on office, retail and industrial property, but hotel and student accommodation transactions have also been considered.
"We are in a terrific position in being able to match borrower needs with investor appetite for mortgage exposure," said M&G head of real estate finance John Barakat, "With many traditional bank lenders seeking to reduce their real estate exposure, insurance companies and pension funds can help fill the ‘funding gap' reported widely in the market. We help borrowers reduce their execution risk by being able to give them a single source for both senior and junior debt.
"Commercial real estate debt offers great value relative to other fixed income assets, so our appetite is definitely increasing. We think this will be a growing asset class as more investors and advisors become familiar with the strategy.
"On the investing side, we are working on new acquisitions, refinancings and debt restructurings directly with borrowers and banks. We've also been purchasing performing loans. Capital, especially for anything other than prime assets, remains scarce, so we are finding a lot of receptivity from borrowers."
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