Bridging lender Dragonfly Property Finance has acquired a £130 million fund to manage after its parent firm Octopus Investments raised the funds.
The Commercial Real Estate Debt Fund, which hosts £130 million for its launch, is a closed-ended limited partnership that will offer its institutional investors a credit-based exposure to the UK commercial property market.
“We are delighted to have been able to offer institutional investors access to this exciting asset class,” said Simon Rogerson, CEO of Octopus Investments. “There is a real demand from investors for commercial property debt while Dragonfly’s track record in providing finance to entrepreneurs and property professionals is exceptional.” He adds that the fund’s launch is part of Octopus’ target for rapid expansion.
Funding has been provided by Octopus and a broad range of third-party institutional investors. These investors include a leading European family office and a number of pension funds. Simba Capital acted as placement agent for the fund.
Dragonfly is targeting an annualised internal rate of return of 11 per cent–12 per cent for the fund, after all fees and costs are subtracted. The fund will have a three-year commitment period with full repayment expected after approximately four-and-a-half years.
The UK’s commercial property sector has performed increasingly well in recent months, with rental and capital growth benefiting from the wider economic recovery. However, traditional lenders have maintained the highly conservative lending policies they adopted in the wake of the financial crisis, leaving many entrepreneurs struggling to access finance.
“For investors, commercial property debt is a compelling way to access the asset class,” added Ludo Mackenzie, Dragonfly’s Head of Commercial Property. “Not only are the potential returns very attractive, but we look to manage the downside, with lenders taking first charge on the properties against which the loans are secured.”
Octopus Investments is a UK fund management business trading in several specialist sectors including property finance, healthcare, energy and smaller company investing.
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