German pension fund makes €750m debt mandate

BVK has handed Deutsche Asset Management a €750m mandate to invest in real estate debt in both the US and Europe.

German pension fund Bayersiche Versorgungskammer (BVK) is ramping up its investment in real estate debt via a €750 million investment mandate awarded to Deutsche Asset Management (AM), PDI sister title Real Estate Capital has reported.

BVK has previously invested in a number of one-off debt deals with different lending partners, including one in the UK and five in the US originated for it by Deutsche AM, but this is the first time the pension fund has awarded a dedicated mandate for real estate debt.

The capital will be structured as a fund and will invest in stretched senior loans and subordinated loans in both Europe and the US said Andrea Vanni, head of European debt investments at Deutsche Asset Management.

Focused on large, high-quality assets, the fund’s blended target returns will be in excess of 4 percent, and individual investments are likely to be between €50 million and €250 million each.

Deutsche AM already invests in senior CRE debt on behalf of the €750 million European Senior Loan Fund and Vanni said that the two mandates will not co-invest. However, advising both will allow his team to consider investing in debt deals across the capital stack.

“We could, for example, provide x amount of money for a portfolio and split it into two loans secured on different assets” depending on their suitability for the different financing strategies, he explained.

“We see opportunities now in London and the UK. With all the uncertainty going on, there is product available and the US will continue to be a very relevant part of what we do, especially as we like big single assets of good quality and there are not so many in Europe. European borrowers also tend to want relatively lower leverage for these kinds of assets compared to the US.”

Clemens Schaefer, CIO and head of portfolio management in Europe at Deutsche AM, said the new capital commitment “demonstrates the growing demand for real estate loans by alternative lenders.”

The European Senior Debt Fund, which invests on behalf of a European insurance company, has invested €470 million of its capital, with recent investments closing in London, Madrid and Paris. “We have another €100 million in three deals we will close before the year end,” he said.

Existing debt investments made for BVK, before the fund was closed last week, total approximately €500 million, and the new mandate will bring the total volume of Deutsche AM’s real estate debt business to €2 billion as of this month.