Real Estate Principal Investment Area (REPIA) is exploring options to create a fund that would provide senior and mezzanine loans to property investors, and will target property lending that is riskier but which would offer higher potential returns, the Times said without citing sources.

Mezzanine debt is commonly used to plug the gap between equity and senior debt, usually in the 60-80 percent loan-to-value band. The fund's structure and make up would be similar to another $2.6 billion property debt fund that REPIA set up in 2009 to target U.S. property investors, the newspaper said.

Europe's property industry is grappling with a widening debt funding gap, the shortfall between debt needing refinancing and the money available do so, as more banks slash lending to the sector in a bid to comply with incoming solvency regulations.

Property consultancy CBRE Group estimates that there is about 960 billion euros ($1.3 trillion) of outstanding debt secured across Europe, of which 575 billion must be repaid within the next three years.

Non-bank financiers that have recently launched funds targeting the financing gap include the property units of insurers Prudential Financial PRU. and AXA Group (AXAF.PA) while fund manager BlackRock (BLK.N) said it was considering making a foray into real estate debt.

Goldman Sachs was not immediately available for comment. ($1 = 0.7509 euros)

(Reporting by Brenda Goh)

• A Permanent Economic Emergency