Standard Life Investments is launching a new £300m senior debt fund targeting the UK commercial real estate market.
The fund, which is targeting annual returns of 5-6% a year over 10 years, has received a cornerstone investment of £100m from Standard Life Group Pension Scheme.
Standard Life is looking to attract other investors to grow the fund to £250-300m, with final close expected by June 2015.
The fund has already completed its first deal, lending £10.5m to Europa Capital to help fund its purchase of an open air shopping centre in Workington this summer. It also has £50m of debt deals going through legal documentation.
Standard Life is aiming to invest all the fund’s proceeds a year after final close. It will target deals with LTV of up to 70% in exceptional circumstances, but generally up to 60-65%.
It is the first external debt fund that Standard Life has launched. Since starting its real estate lending programme last year, it has received two internal mandates and has £270m invested or in documentation.
Neil Slater, Standard Life Investment’s head of product finance and structuring, said margins had compressed in recent months, but that there were still attractive opportunities.
“It is very competitive in London and the South East, but outside not as much. We will look across the UK,” he said, adding that the fund would invest against a diverse range of industrial, retail and office assets.
David Paine, Standard Life Investments head of global real estate, said: “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.”