Venn debt fund second close raises £185m

Venn Partners has held a second close for its first real estate debt fund, bringing total capital raised for the vehicle to £185 million.

Venn, which launched the fund last August, expects to hold a final close by the third quarter this year. Although there is no specific final target, Venn partner Beatrice Dupont said the likely final size is £250 million.

Venn Commercial Real Estate Fund 1 (VeCREF 1) seeks low double digit returns and makes value-add, mid-market sized loans of £5 million up to £50 million at up to 75 percent loan-to-value. The investors are a mix of UK and North American pension funds.

With £140 million invested so far, Dupont expects to have all £185 million invested by next month in 13-15 different deals across the UK.

“We continue to see a significant number of opportunities in the pipeline”, she said. “We specialise in areas where we see there’s a credit supply and demand imbalance. We don’t look to compete against banks and instead focus on areas that are undersupplied from a credit standpoint often as a result of bank regulation.”

In total Venn has transacted on circa £1.2 billion to date in 27 loans. In addition to VeCREF 1, the credit investment manager invests on behalf of a number of North American institutional managed accounts.

“Our managed accounts tend to like bigger tickets,” Dupont said.

Residential is one asset class the firm has targeted. “Another source of deals, for example is if you have an office building (intentionally) on short leases while the client applies for change of use (say into PRS) and that doesn’t sit very well with banks.”

Venn Partners launched in 2009 and subsequently moved into CRE when Dupont, managing director of Venn Partners Paul House and several colleagues joined the firm from Citi.

Norwegian conglomerate Siem Industries part-owns the business and was the first pocket of capital for CRE lending. It continues to provide capital for some deals, such as whole loans which are subsequently syndicated.

A £97.5 million residential development loan last year for borrower Hoopla, for example, was funded through Siem’s balance sheet, in order to create an investment for VeCREF 1 and the senior portion syndicated to another lender.

“When we started at Venn, we were able to capitalise on opportunities immediately given our success in raising several segregated accounts. This enabled us to tailor the fund investment strategy to the current market opportunity and also build a successful track record to illustrate our capabilities. We have been fortunate to have investors put their trust in us and are absolutely delighted with the successful fund raise and where we are as a firm today.”