Octopus funds London portfolio deal – Exclusive

UK-based boutique lender provides a £31.3m loan with a 65% LTV ratio for office buildings to be converted into apartments.

Niche UK lender Octopus Property has provided a £31.3 million short-term loan to fund the purchase of a London office portfolio ahead of its conversion into apartments.

The acquisition facility, arranged by debt advisory firm BBS Capital for a private property company, has a loan-to-value ratio of 65 percent. The facility is understood to have a term of six months.

The loan will be used to fund the £48.15 million acquisition of an office portfolio in Brentford, west London, from Columbia Threadneedle Investments. The portfolio comprises more than 170,320 square feet, of which there is consent, under permitted development rules, to convert 140,248 square feet into 268 studios and one- and two-bed residential apartments.

The portfolio includes New Horizons Court, a 140,248-square-foot office campus spread across four buildings, as well as three additional office buildings known as The Courtyard Buildings, providing a further 30,072 square feet of space.

Conversion of the properties is expected to begin immediately.

The deal was arranged in just two weeks, according to Westley Richards, of BBS Capital, adding that it has closed £100 million of financing deals with Octopus this year.

“This facility represents the largest of its kind we have done this year, reflecting both the robustness of the market and our position as the first-choice lender for real estate professionals seeking fast and flexible financing for a diverse range of residential and commercial projects,” said Mario Berti, chief executive officer of Octopus Property.

In September, Octopus held a £115 million first close on its Commercial Real Estate Debt Fund II, which will provide property loans with terms as short as three months in the UK real estate market. It is targeting £200 million, with a final close expected in March 2018.

Octopus, formerly known as Dragonfly Property Finance, estimates that would enable it to lend more than £500 million in the next three years.

Its predecessor fund, which has reached the end of its investment period, generated a gross IRR of 12.6 percent to June 2017, and the second is understood to be targeting returns not significantly below that mark.