Specialist UK property lender Octopus Property has raised £230m (€266m) for its real estate debt fund.
Commercial Real Estate Debt Fund II (CREDF II) has accepted investor commitments from UK, European and Canadian pension funds and fund of funds.
Launched in September 2017, CREDF II’s strategy focuses on originating short-term loans secured by first charge against UK commercial property.
In October last year, Octopus raised £115m in a first close for the fund. The plan was to target a £200m final close with a hard cap of £230m.
CREDF II follows Octopus’ debut fund (CREDF I), which closed in 2014 with £130m of capital. Octopus also has the CREDF Syndication, a £140m sidecar fund which raised from existing investors in 2016.
CREDF I has delivered a gross internal rate of return of 12.5% as at December 2017, Octopus said.
Ludo Mackenzie, the head of commercial property at Octopus 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.”
Mackenzie said 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.”
CREDF II 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 CREDF II has already completed 19 commercial loans with a gross value of £105.4m, Octopus said.
”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,” Mackenzie said.