Octopus hard closes £230m institutional real estate debt fund

By Daniel Lanyon on Monday 16 April 2018

Editor's PickAlternative Lending

Pension funds and insurance companies are increasingly attracted to alternative income assets.

Specialist UK property lender Octopus Property has reached a final close of £230m for its Commercial Real Estate Debt Fund II.

The portfolio’s strategy focuses on originating short-term loans secured by first charge against UK Commercial Property. The fund was launched in September 2017, targeting a £200m final close with a hard cap of £230m.

It has seen investor commitments from UK, European and Canadian pension funds and fund of funds.

Part of Octopus Group, Octopus Property include previous funds; Commercial Real Estate Debt Fund (“CREDF I”), a £130m fund closed in 2014, and CREDF Syndication, a £140m sidecar fund raised from existing investors in 2016.

The firm says the former has delivered a gross IRR of 12.5 per cent to December 2017 with an average LTV of 58.0 per cent

 Ludo Mackenzie, Head of Commercial Property at Octopus Property and manager of Funds I & II, says the team has seen significant demand from investors for the strategy.

“CREDF I’s strategy of short-term asset backed lending offers significant mitigation of risk while delivering double digit returns, commensurate with top quartile direct property funds of the same vintage[i]. CREDF II will seek to replicate this, and as we enter a period of lower returns for commercial property we believe CREDF II is well positioned to outperform most direct property funds,” he said.

The fund aims to complete loans with a combined value in excess of £600m over the next three years. In the six months since first close, the Fund has already completed 19 commercial loans with a gross value of £105.4m.

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