Octopus raises £230m for institutional real estate debt fund

Michael Lloyd

April 16, 2018

Specialist lender, Octopus Property has reached a final close of £230m for its Commercial Real Estate Debt Fund II (CREDF II).

The fund’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.

CREDF II has accepted investor commitments from UK, European and Canadian pension funds and fund of funds.

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 CREDF II is well positioned to outperform most direct property funds.”

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.

Mackenzie 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.”

The fund is the latest in a number of institutional fund raises by Octopus, which has increased its institutional assets under management by over £500m in 2017. The group now manages more than £1.8bn of institutional funds.

CREDF II builds on the success of Octopus’ 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 58.0%.

Simba Capital acted as Placement Agent and Macfarlanes is providing legal support for the fund.

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