UK pension funds have backed Octopus Property’s latest commercial real estate fund, which raised £115m at its first close.
Octopus would not disclose which retirement schemes have backed Commercial Real Estate Debt Fund II (CREDF II), but conceded that they are a blend of new and existing investors that also includes insurers.
The fund intends to lend cash to developers and individuals secured against offices, warehouses and retail outlets in the UK.
This is Octopus Property’s third debt product launch in three years following CREDF I and CREDF-S, which have collectively advanced £420m.
The 12.6% gross return by CREDF I at June 2017 highlights why pension schemes have backed its latest fund at a time when the cost of money in the UK has been less than 1% for eight years.
CREDF II typically lends between £1m and £5m usually over 12 months to parts of the property market that banks exited when the downturn hit.
The fund is managed by Ludo Mackenzie, Octopus’ head of commercial property.
He will be back to tap institutional investors for cash to reach the fund’s target of £200m at final close. If he achieves this he will manage a loan book of more than £500m secured against commercial property in the UK.
Mackenzie said there is a real need for commercial property finance in the UK.
“Repeat commitments from CREDF I investors, together with new investment, are testament to the continued strength and growth of the business as well as the successful track record of CREDF l and CREDF-S,” he added.
“From a borrower’s perspective, we provide loans that are more versatile than traditional bank finance and cheaper than private equity. From an investor’s perspective, CREDF I has been able to deliver returns that are comparable to equity funds, but with stronger downside protection.”
