TH Real Estate raises €194m at first close for UK debt fund

TIAA Henderson Real Estate has completed a first close of £138 mln (€194 mln) for its UK Enhanced Debt Fund, the company's maiden commercial property debt fund launched in December 2014.

The capital has been committed by TIAA-CREF, TH Real Estate and Aviva Investors Real Estate Multi Manager. The fund is aimed at generating net returns of 6-7% with a 6% distribution yield.

The six-year vehicle will invest in whole loans and selective mezzanine loans up to 75% loan-to-value with a focus on the UK market. TH Real Estate's real estate debt team led by Christian Janssen said that loan origination will be focused on prime and strong secondary assets, as well as well-positioned regional assets in the core-plus and value-added sectors. The fund can selectively syndicate the senior portions of whole loans, in order to enhance returns and optimise its investment portfolio, the company added.

'Structural changes in the lending market have created the opportunity for alternative lenders to originate CRE debt investments at attractive risk-adjusted returns,' commented Christoph Wagner, director of debt strategies at TH Real Estate, who is responsible together with Shawn Kaufman for leading the origination, structuring, portfolio management and syndication of Investments.

He added: 'Meanwhile, a weak supply of efficient debt finance is continuing for certain parts of the UK market. As a result, we believe that CRE debt can offer investors stable, income-focused returns with significant insulation from volatility in the wider property and investment markets.'

The fund has already commenced its investment programme. The first transaction, which has been fully retained and not syndicated, was an £85 mln senior, seven-year, fixed rate, interest-only loan at 63% LTV, secured on a portfolio of three prime office and retail properties located in central London.

The second transaction was a five-year, 74% LTV, partially fixed/floating rate facility to refinance a modern student accommodation and retail property in West London. TH Real Estate will retain the fixed-rate mezzanine loan and intends to syndicate the 55% LTV floating rate, senior portion.

In January, TH Real Estate also provided a £100 mln, 20-year, fixed-rate facility secured on a regionally dominant retail and business park in the northern part of the UK.