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Ludo Mackenzie, Octopus

Octopus hits GBP230m hard cap for institutional real estate debt fund


Octopus Property, the specialist UK property lender and part of Octopus Group, has reached a final close of GBP230m 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 GBP200 million final close with a hard cap of GBP230 million.
 
CREDF II has accepted investor commitments from UK, European and Canadian pension funds and fund of funds.
 
CREDF II builds on the success of Octopus’ previous funds; Commercial Real Estate Debt Fund (CREDF I), a GBP130 million fund closed in 2014, and CREDF Syndication, a GBP140m sidecar fund raised from existing investors in 2016. CREDF I has delivered a gross IRR of 12.5 per cent to December 2017 with an average LTV of 58.0 per cent.
 
Ludo Mackenzie (pictured), Head of Commercial Property at Octopus Property and manager of Funds I & II, says: “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 GBP600m 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 GBP105.4m.
 
Ludo 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.”
 
Octopus Property is one of the UK’s leading specialist lenders, providing bespoke financing facilities secured on commercial, development and residential property. Since 2009, it has lent more than GBP3 billion across c.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 over GBP500 million in 2017. The group now manages more than GBP1.8 billion of institutional funds.
 
Simba Capital acted as Placement Agent and Macfarlanes is providing legal support for the Fund.

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