European asset management firm Arrow Global has surpassed its €2.5 billion fundraising target for its second credit fund, Arrow Credit Opportunities II, closing the vehicle at its hard-cap of €2.75 billion, including a general partner commitment of €275 million.
London-headquartered Arrow, which describes itself as an investor and asset manager in the non-performing and non-core assets sector, will target a range of asset-backed credit opportunities through the fund, including in the real estate sector.
Arrow will focus its latest vehicle on proprietary off-market opportunities, avoiding public auctions where it said pricing tends to be higher. The firm said this enables it to focus on the quality of underlying asset, such that it intends for 90 percent of the ACO II portfolio to be secured by real estate, cash in court, or other mixed securities.
The firm claimed it saw “growth” in all geographies for the capital raise, with equity coming from a mix of global institutional investors from the US, Europe, Asia-Pacific and the Middle East.
Speaking to Real Estate Capital Europe, Charlotte Gilbert, managing director of client and product solutions at Arrow, said the firm will look to invest in portfolios of European non-performing-loans, non-core banking opportunities, certain real estate assets, and other assets acquired out of distressed situations.
Arrow will target gross returns of 18-20 percent, she added.
The firm, which was founded in 2005 in the UK as a debt purchase company, launched its maiden commingled fund in 2020 raising €1.7 billion in equity from institutional investors. Last year, the firm opened a Luxembourg office to support its Luxembourg-domiciled fund series.
“Consistent with our origination strategy, we run a vertically integrated model where platforms, in which we have an equity interest, originate largely off-market investment opportunities that meet the risk return requirements of our LP investor base,” Gilbert added.
Arrow operates 18 specialist asset management and servicing platforms across five prioritised markets – UK, Ireland, Italy, Portugal and the Netherlands. In 2022, the firm acquired Portuguese real estate firm Sansedoni.
In January 2022, Arrow acquired a significant minority stake in UK specialist development lender Maslow Capital. Speaking to Real Estate Capital Europe, Emma Burke, head of origination at Maslow, said the firm is looking to draw on the capital provided by Arrow’s ACO II to grow its loan book this year by £900 million (€1 billion).
She added Maslow will look to procure development lending opportunities in the build-to-rent/private-rental and student accommodation sectors in UK locations such as Leeds, Manchester, Birmingham, Bristol, London and Greater London.
Gilbert added: “Maslow will originate and service real estate debt investment opportunities that are appropriate for ACOII, providing our investors with unique access to below the radar granular dealflow that have compelling risk adjusted return profiles.”
The UK specialist developer has been active this month, increasing the size of its lending deals. This week, Maslow provided a £114 million development facility, supporting Union Property Development with the delivery of its 356-bed, purpose-built student accommodation scheme in Paddington, London.
Earlier this month, the firm originated its largest loan yet, with £258 million residential development financing in Kensington, London. The four-year financing was provided to a joint venture between SevenCapital, a UK-focused developer, and MARK, the pan-European real estate manager.