Pramerica Real Estate Investors plans to launch two new funds as it undertakes a major expansion of its global debt strategy.
The European arm of US-based Prudential Financial’s real estate investment and advisory business is capital raising for a follow-on mezzanine debt fund, and a separate vehicle targeting sub-senior and core junior debt.
It is in talks with potential investors, including sovereign wealth funds and institutional investors, and aims to secure commitments of between £50m and £150m from about seven clients for each fund.
The mezzanine debt fund will target returns in the low teens, while the sub-senior fund will aim for 8-10%. Both are expected to be significantly larger than Pramerica’s debut £492m mezzanine fund.
“We’re developing our investment platform, which was always intended to be a series, and discussions with investors are already well progressed,” said Pramerica managing director Andrew Radkiewicz.
He added: “We’re responding to the institutional investor market, which prefers lower-risk investments.” A first close for both funds should be announced by the end of the year.
The move follows the firm’s European mezzanine fund, Pramerica Real Estate 1, which had a final close in May 2011.
It has completed a number of deals including investing £38m in Evan Randall’s purchase of Drapers Gardens, EC2, and Brockton Capital’s Mailbox in Birmingham.
It still has a year left in its investment period, and is “materially invested” already, according to Radkiewicz.
The news comes as existing mezzanine debt funds launched in late 2010 and early 2011, including Duet Private Equity and LongBow Real Estate Capital, face the imminent expiry of their investment periods.
“Everyone is trying hard to deploy capital before the end of their investment period, but may have to compromise on returns as a result,” said Rick Gambetta, fund manager of real estate debt at Matrix Property Fund Management.
