Standard Life Investments is launching the Commercial Real Estate Debt Fund, its second vehicle to provide senior debt on UK commercial real estate.
Targeting around £250m of capital, the new fund is designed for institutional investors and Standard Life’s group pension scheme has committed £100m. The fees are 50bps on net asset value, with no performance fee.
Neil Slater will manage the fund, which is seeking 5%-6% returns. “The fund aims to provide a reliable and stable source of income with limited capital risk, together with the benefit of being an excellent diversifier for existing portfolios,” said David Paine, SLI’s head of global real estate.
It is structured as limited partnership, with a 10-year term. While senior debt is its focus, the fund is allowed up to 10% of mezzanine, and the average portfolio LTV is 70%, which will help it achieve its return target.
SLI started lending on UK real estate in late 2013 on behalf of in-house client Standard Life Insurance; so far this year its team, led by Neil Odom-Haslett, has provided £200m of senior debt with another £175m in the pipeline to close.
The only deal it has publicised was a £50m participation in a senior loan to UK listed property company London & Metric which the insurer acquired from Helaba in May. The debt is secured on a distribution warehouse portfolio across the UK.
The investment manager has also completed its fifth and final close on Euro Club, its continental European real estate vehicle, raising some €300m from institutional investors in the US, Canada, Thailand, The Netherlands, UK and the Middle East. Most clients were advised by Townsend Group.
“The Club strategy is core-plus in nature, but over the vehicle life it is targeting a 13% net IRR,” said SLI’s head of continental European Real Estate Daniel McHugh. “We believe this asset profile offers an attractive return to investors with lower risk profiles.
With target gearing of 50%, Euro Club has €600m of firepower and has already committed over 60% of the available capital to investments in Paris, Copenhagen and Germany.