PGIM to deploy €1bn in second European value-added fund

PGIM, the investment management subsidiary of US insurance giant Prudential Financial, is following up on the strong performance of a predecessor fund by raising more than $1bn of equity for its European Value Partners II fund.

The sum raised ($1.1bn or €930m) is double the size of European Value Partners I, which at €500m has invested 80% of its capital in office, residential and logistics in Germany and France.

The company said it expects to deploy 70% of its firepower by the end of this year. The new fund was seeded 60% with last-mile logistics and 25% with residential assets in Europe, including logistics developments in Berlin, Paris and the UK, and residential developments in the UK and France. It also hinted at a possible joint-venture tie-up with an established British logistics company.

Targeted assets are those with value-add potential, perhaps with high vacancy rates or where active asset management could raise the rent level through repositioning.

In the UK, the focus is likely to be on high-value senior living projects in and around affluent areas of London, while in France €200m has been earmarked for affordable housing. The fund is targeting a yield of 12-14%.

Since the launch of Fund I in 2015, the firm has now completed 23 transactions totaling $3.5 billion across the UK, Germany, France, Spain and Italy from its value-add funds. More than 70% of these were sourced off-market, PGIM said.

PGIM's head of Europe Raimondo Amabile said that, in addition to the firm’s track record, PGIM’s fundraising effort has also benefited from investors’ confidence in post-covid recovery across regions. “Europe offers a compelling mix of value-add real estate opportunities resulting from market dislocation, a cyclical recovery and ongoing structural trends in the region.”