London-based DRC Capital’s second mezzanine fund made two more loans last month, both German refinancings. European Real Estate Debt II advanced a €16.2m mezzanine facility as part of a circa five-year, €71.2m refinancing of six department stores in western German city centres, let to the Metro Group subsidiary Kaufhof.
The fund also provided Evans Randall with a €37.5m mezzanine loan as part of a €182.5m, seven-year refinancing of the private equity group’s Konigs-bau Passagen mall in Stuttgart. European insurer Allianz provided the €145m of senior finance at a fixed rate of 3.5%. Evans Randall said it was “a core element” of its strategy to take advantage of historically low interest rates for senior debt.
Dale Lattanzio, DRC Capital’s managing partner, said ERED II’s target return is over 10% and it has a good pipeline of deals. “More refinancings are coming up in Germany than previously and we are seeing a good flow of UK deals. Investors who use leverage are back in the market, which is good news.”
The fund, launched last year, has made six investments and raised more than £200m in two closings. A third and final closing is expected soon, with a total fund target size of £400m. Two big US public pension plans have invested in the fund.