Catalyst Capital has raised €150m ($167.5m) for a European value-add property fund.

US and European pension funds backed the investment manager in the first close of the Catalyst European Property Fund II (CEPF II).

Funds of funds, family offices and wealth management firms – as well as investors from its CEPF I vehicle – backed the fund, which is aiming to invest €1.25bn in Europe’s office and retail sectors.

Julian Newiss, founding partner of Catalyst, said the current environment provided an excellent opportunity to generate strong returns.

“The volume of European distressed property loan sales coming onto the market has never been higher and is set to continue as a result of the European Central Bank’s Asset Quality Review,” Newiss said.

Catalyst said it has invested just under €75m in three assets in Europe and the UK for the fund, which is targeting both development and refurbishment.

The UK, France, Belgium, Germany and Poland are the main focus, with Catalyst seeking value-creation opportunities in markets with a “dislocation” between prime and secondary assets.

CEPF I, fully invested in 2012, has divested more than 50% of its portfolio over the last year.

Disposals include the Les Ateliers du Parc office building in Paris to Deka Immobilien for €155m and the office block at 30-38 New Bridge Street in London to the Corporation of London for €32.45m.