iii launches second real estate debt fund

German insurance companies and pension funds are increasingly turning to real estate debt, attracted by a loophole in the Solvency II and Basel II/III capital requirements, according to iii-investments.  

The changing regulatory landscape as a result of stringent capital requirements set out in Solvency II and Basel II/III has led to a surge in demand from German investors for real estate debt financing opportunities, according to iii-investments (iii), a property fund manager owned by Unicredit's HypoVereinsbank. 

In response to this growing appetite, iii has launched a second real estate debt fund just six months after its first. 

Its first fund, launched last year, was structured as a managed account, with iii managing €200 million on behalf of a German pension fund. 

iii last week announced the successful closing of its second fund with €100 million in commitments. The fund, this time structured as a traditional blind pool vehicle, is hoping to garner €250 million. 

The fund will invest across a portfolio of low-risk loans of between €15 and €40 million, secured against real estate located predominantly in Germany. The loans will be originated by banks but then syndicated in part to iii, effectively making it an indirect lender. 

“The attractiveness of this new type of product lies in the changing regulatory environment,” said Reinhard Mattern, iii chief executive. “As a consequence of Basel II/III, the banks are reducing considerably their activities as a traditional source of financing for real estate.”