UBS AM fully invests original £241m fund capital

The real estate debt fund manager is now reinvesting more than £82m that has come back via repayments and borrower cancellations.

UBS Asset Management has fully committed the original £241 million ($313 million; €269 million) of equity raised for its real estate debt fund.

The firm announced that the closing of three new loans, and extension of a fourth, for a combined £48.7 million has brought committed loans to 100 percent of the equity raised by the December 2015 final close of the UBS Participating Real Estate Mortgage Fund (UBS-PREMF).

The fund, which was launched in December 2013, continues to recycle capital ahead of its end date at the close of this year. It is currently focused on reinvesting a total of £82.2 million of funds that have been returned to the asset manager through repayments and borrower cancellations.

It is understood that, at the portfolio level, UBS-PREMF is targeting 9 percent to 11 percent IRR and to date is within that range. It is also understood that, at the fund level, it is targeting between 8 percent and 10 percent and continues to climb towards that target.

As a participating debt fund, total returns are driven by interest from the loan portfolio, plus a share of both rent and capital appreciation from the underlying property assets.

The investment period comes to an end in December 2017, after which capital returned from loans that mature or are pre-paid is due to be returned to investors. Anthony Shayle, managing director and head of real estate debt EMEA, told Real Estate Capital that the firm is considering its future strategy.

“We are examining the options for inter alia a follow-on fund, in a market that is supportive of the returns available through debt financing, one of which is a new fund, but at this stage we can’t be any more specific than that,” Shayle said. “Our thoughts might include continental Europe if we can identify strategies that investors find attractive given our emerging track record.”

In total, the fund has made 17 loans, including those already repaid, secured by 74 properties in England and Scotland. The average loan size has been £14 million. The net portfolio size stands at £160 million.

The latest deals included a £22 million three-year loan to support the acquisition of a commercial site in Croydon, south London, ahead of a redevelopment; a £17 million three-year loan for a site in Greater Manchester, ahead of a residential development; a £7.7 million four-year loan to refinance a commercial and residential portfolio in Edinburgh; and a £1.8 million extension to a £10.7 million development loan for an office and hotel scheme in Brighton.

UBS-PREMF typically lends against property lot sizes of up to £40 million in whole loans of up to 75 percent loan-to-value.