Duet Private Equity is planning to launch a mezzanine debt fund in 2011 that will be quoted on the London Stock Exchange’s main board, Reuters said. The fund, Duet Real Estate Finance Ltd., will invest the net proceeds of its 100 million pounds ($158.1 million) fundraising, and will aim to help fill a European commercial real estate financing gap, Reuters wrote.
(Reuters) – Duet Private Equity is planning to launch a quoted mezzanine debt fund later this year to help plug a 950 billion euro ($1.3 trillion) European commercial real estate financing gap spawned by conservative bank lending.
The fund, Duet Real Estate Finance Ltd, the first of its type to be quoted on London Stock Exchange’s main board, will target a gross internal rate of return of 15 percent, Duet Private Equity said.
It will invest the net proceeds of its 100 million pounds ($158.1 million) fundraising, at an issue price of 100 pence per share, into parent company Duet Group’s European Real Estate Debt Fund, which invests in income-producing commercial real estate assets primarily in Britain and Germany.
In December, Reuters reported more specialist mezzanine debt funds were set to pour money into the debt-starved British property market, gaining access to not-for-sale assets and nabbing hefty returns in the process.
This development would see mezzanine funds — traditionally a short-term, high-interest bearing bridging loan — filling a longer-term funding gap caused by debt wary banks’ reluctance to fully refinance loans on property assets.
“Significant falls in asset values, increased capital requirements and the overall need to reduce balance sheet size are forcing banks to reduce their real estate exposure,” Duet Private Equity said.
The fund will target debt in the 65-80 percent loan-to-value (LTV) layer, filling the gap between owner equity of about 20 percent and the 55-65 percent senior debt provided by banks, Duet Private Equity said.
“This should present an opportunity for non-bank lenders to lend amounts above 55 percent to 65 percent LTV on attractive economic and structural terms,” Duet Private Equity said.
Oriel Securities is acting as financial advisor and bookrunner. Duet Private Equity is investment advisor. ($1 = 0.7311 euro) ($1=.6324 Pound) (Editing by Hans Peters)