M&G Investments has raised almost £1.5bn of capital for two mezzanine funds. The capital committed is probably the largest ever to one manager for European mezzanine debt investing. Sources said M&G could have raised twice the amount, as the offer was heavily oversubscribed.
M&G’s real estate finance team, led by John Barakat, raised €343m for a first mezzanine fund in 2011. For the follow-on strategy, they offered two funds: Real Estate Debt Fund II, which will make relatively higher-risk investments at 65-85% loan-to-value ratios, targeting returns above 12%; and Real Estate Debt Fund III, which will invest in the stretched senior position, at 50% to 70% LTV.
M&G also has a large amount of new capital for senior lending and will continue to offer borrowers the option of taking whole loans at LTVs from 0-85%, depending on the deal. The capital for senior lending comes from in-house Prudential fixed-income allocations but also from third-party mandates.
M&G is believed to have had several closings for a senior debt fund this year. A source said it has also taken on several large segregated senior debt mandates. Investors in Real Estate Debt Funds II and III included UK, European and US corporate pension funds and public plans. More than half a dozen Townsend Group clients are investing, including New Mexico State Investment Council and £200m from New Jersey Division of Investment.