UBS Global Asset Management’s Global Real Estate business has raised £140m for a new UK debt fund from Mitsubishi Corporation, a Netherlands pension fund and UBS’s own balance sheet. “The two external investors comprise the bulk of the capital,” said the fund’s manager, Anthony Shayle, who is also UBS’s head of global real estate.
Mitsubishi, which is investing £50m of seed capital, has a joint venture with UBS in Japan, which manages the country’s second largest REIT. The nine- to 10-year UBS Participating Real Estate Mortgage Fund expects to close at £300m-350m by June 2015, and has a further 12 months after that to invest the money.
It will achieve its 8-10% annual target internal rate of return by charging a front-end fee and a fixed-rate coupon, plus a proportion of surplus rental income after the coupon is paid. “To get to our IRR target we want a profit share on capital gains at the end of the life of a loan,” said Shayle.
The fund will seek £10m- 40m loans, providing whole loans up to 75% LTV for a term of five to seven years. It is working on four deals, including one forward funding and an investment-led loan on an alternative asset class property.