EUROPE - AEW Europe and Natixis Asset Management will announce a first closing for their debut real estate debt fund early next week, with capital expected to come from French insurance companies.
The senior debt fund, managed jointly by AEW Europe and Natixis's fixed income business, will originate loans and buy existing debt secured against office, retail and logistics properties in France, the UK and Germany.
Loan-to-value (LTV) ratios will be close to 60%.
Christian Delaire, chief executive at AEW Europe, was unable to disclose the value of the capital raised, but said €500m would eventually be targeted for a final close.
The fund has been marketed as a fixed income product to French institutional investors, but capital efforts recently moved to other investor groups.
Delaire said he was aware of strong interest from German insurers.
The fund will have a seven-year life and is expected to produce total returns above 5%, which Delaire said would be very attractive given the relative level of risk being taken.
It may prove to the first in a series of real estate senior debt funds to be launched by AEW Europe and Natixis Asset Management.
Delaire ruled out the possibility of launching a real estate mezzanine fund in the short term, but said a separate pan-European opportunity fund - also in the market to raise capital - might invest in mezzanine debt as part of a wider strategy.
"If the market evolves, and there is a higher demand in terms of mezzanine financing, we may consider launching a mezzanine fund," he said.
"But we think today it is premature."
A number of real estate investment managers are raising capital for real estate debt funds, but most of these are focused on the UK.
The offering from AEW Europe and Natixis Asset Management is therefore unusual in its geographical focus.
"A pan-European approach is quite unique today," Delaire said.
"Also the fact that we want to invest in both new loans and also existing loans … some funds have a pure primary strategy, others have a pure secondary strategy. We want to a bit of both."