Hermes Real Estate Investment Management is launching a senior debt fund to invest in UK commercial property loans.
Hermes Real Estate Investment Management is launching a senior debt fund to invest in UK commercial property loans.
Hermes Real Estate Senior Debt Fund will invest in private loans secured on UK-domiciled commercial real estate and overseen by Hermes.
Loans will typically be made to strong borrowers in partnership with other debt providers and of values between £30 mln (€35 mln) and £100 mln.
Commercial office, retail and industrial real estate will be targeted to provide a diversified portfolio by borrower, number of loans, underlying assets, tenant covenants and loan maturities. The strategy will focus on high-quality assets with a strong track record of tenant retention in London and the South East, with regional transactions in prime metropolitan locations considered opportunistically.
The launch comes at a time when the funding gap remains substantial. With £143 bn of UK commercial real estate debt scheduled to mature between 2013 and 2017, there are fewer lenders able or willing to underwrite loans in excess of £50 mln on a bilateral basis.
According to Hermes, the fund will create an opportunity to ‘cherry-pick’ transactions with strong risk-return characteristics, especially in an environment where loan-to-value (LTV) ratios have fallen and loan margins have increased.
Hermes REIM is one of the largest real estate managers in the UK with over £5.9 bn (€6.9 bn) of assets under management.
