Octopus Property has reached a final close of £230m for its Commercial Real Estate Debt Fund II.
The fund’s strategy focuses on originating short-term loans secured by first charge against UK commercial property.
Launched in September 2017, the fund targeted a £200m final close with a hard cap of £230m.
It 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.
Investor commitments to CREDF II include UK, European and Canadian pension funds.
It follows Octopus’s 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.
CREDF I has delivered a gross IRR of 12.5% to December 2017 with an average LTV of 58%.
Ludo Mackenzie, head of commercial property at Octopus Property and manager of Funds I & II, said: “We have seen significant demand from investors for this strategy, including existing investors looking to increase their exposure to real estate debt.
“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.
“CREDF II will seek to replicate this and as we enter a period of lower returns for commercial property we believe it is well positioned to outperform most direct property funds.”
He added: “Despite increased interest in the fund, we have deliberately maintained a smaller fund size to allow us to deploy commitments more quickly and focus on the best deals for our investors.”
Octopus Property is a specialist lender, providing financing facilities secured on commercial, development and residential property.
Since 2009, it has lent more than £3bn across around 3,000 loans.
The fund is the latest in a number of institutional fund raises by Octopus, which has increased its institutional assets under management by more than £500m in 2017. The group now manages more than £1.8bn of institutional funds.
Simba Capital acted as placement agent.
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