PREI Breaks New Ground with Debt Fund

Prudential Real Estate Investors has completed Pramerica Real Estate Capital I, an $800 million, closed-end investment vehicle that will supply financing for deals involving European commercial real estate properties.

May 10, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user AMagill

Prudential Real Estate Investors has completed Pramerica Real Estate Capital I, an $800 million, closed-end investment vehicle that will supply financing for deals involving European commercial real estate properties. But Pramerica I is not just any debt fund, it is the largest discretionary, dedicated mezzanine debt fund ever introduced in Europe.

It’s all about timing. Although lenders are starting to warm up to the commercial real estate industry again, financing is still hard to come by; Pramerica I is designed to capitalize on opportunities presented by the gap in the financing of commercial properties.

Citing statistics from advisory firm Navigant, PREI notes in its new European Quarterly Outlook report that as much as $967 billion of European commercial property loans provided by banks and other financial concerns will need to be refinanced within the next two years. As per PREI’s estimates, this necessity may very well lead to a funding gap of as much as $26 billion this year, with the figure increasing to a respective $40 billion and $60 billion in 2012 and 2013.

Pramerica I, managed by the debt team in PREI’s London office, will make financing available for purchases and refinancing with a focus on the disparity between traditional senior debt and equity. The fund will also provide mezzanine or preferred equity financing ranging from roughly $10 million to $125 million, collateralized by premier properties predominantly in the U.K. and Germany.

Not every investment entity will be on PREI’s radar. The list of borrower types that could potentially benefit from the fund is limited to medium to large public and private real estate companies, private equity funds and real estate investment managers. PREI will not waste time when closing transactions. Pramerica I managing director & co-portfolio manager Andrew Macland said that the discretionary nature of the fund allows for nimble moves when attractive opportunities are identified.

The $800 million PREI raised for Pramerica I came from an international group of sources that includes pension funds and sovereign wealth funds in North America, Europe and the Middle East.