Pramerica pulls in €820m for fourth European junior fund

Fourth institutional fund takes firm’s total raised for junior debt to €2bn

Pramerica Real Estate Investors has raised €820m for a fourth junior debt fund, with APG again a cornerstone investor.

The value-added PRECap IV fund is targeting a 13-17% internal rate of return from debt investments in the UK and Germany. It will lend from €10m to over €100m alongside senior lenders, investing in office, retail, industrial and residential properties.

The fund follows the closing in April of €520m junior debt fund PRECap III, which targets 8-10% income-style returns. PRECap III raised an initial €260m with Dutch pension fund APG the “dominant” investor and Pramerica co-investing, according to Andrew Radkiewicz, Pramerica REI’s co-head in Europe.

PRECap III’s capital can be increased by another €260m once the first tranche is invested. PRECap IV includes APG and “a number of other global institutional investors”, Pramerica said, adding that the firm has now raised €2bn for European junior debt since launching its first debt fund in 2010.

Pramerica’s parent, US-based Prudential Financial, manages global real estate debt investments of $53bn and co-invests.

APG also invested in PRECap I and II. The first fund closed with £492m of equity in April 2011 and is fully invested. The second vehicle was a joint venture between APG and Pramerica, which made a €40m junior loan to refinance the La Roca outlet village in Spain – at that time a jurisdiction outside PRECap I’s remit.

Radkiewicz said the equity- raising success showed “the level of investor interest, due to strong risk-adjusted returns and the attractiveness of this flexible capital to real estate owners”.

Pramerica REI recently expanded its European debt team by recruiting originator Kim Torriani from Wells Fargo.

US investors cross pond for junior debt

Investors have injected a record amount into European junior debt this year, fuelled by increased interest from US public pension plans.

M&G Real Estate raised over £1bn for M&G Real Estate Debt Funds II and III, with investments from more than six clients of consultant Townsend Group.

Sacramento County Employees Retirement System announced its first investment in European debt this month, with a $50m commitment to DRC Capital’s European Real Estate Debt Fund II. The fund began investing in the summer after a first closing and is targeting a 9-14% internal rate of returns.