Octopus hard closes £230m institutional real estate debt fund

By Daniel Lanyon on Monday 16 April 2018

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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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